This is the web version of Bull Sheet, a no-nonsense daily newsletter on what’s happening in the markets. Sign up to get it delivered free to your inbox.
Happy Friday, everyone.
Taper with no tantrum. That’s what we’re getting a glimpse of this morning after the European Central Bank yesterday beat the Fed in the race to cut back on stimulus spending, and—what’s this?—stocks are jumping.
To be fair, you’d need to get out the really strong bifocals to spot where exactly the Europeans are cutting back on asset purchases. And, Christine Lagarde herself told the markets, “The lady’s not tapering.” There’s a Maragaret Thatcher reference somewhere in that comment. Perhaps fans of “The Crown” spotted it before I did.
To recap: Asian and European stocks are gaining this morning, as are U.S. futures. Crypto is flat.
Let’s see what else is moving markets as we close out the trading week.
Markets update
Asia
- Asia is bouncing back, with the Hang Seng up 1.6% in afternoon trading as tech stocks gain.
- Toyota shares climbed 0.6% even after the automaker cut global production output as COVID infection numbers hit suppliers in Southeast Asia.
- Global crude prices have been choppy in the past 24 hours after China, in an unprecedented move, released oil onto the markets from its strategic reserve as domestic energy costs surge.
Europe
- The European bourses were mostly higher in early trading with the Stoxx Europe 600 up nearly 0.3% at the open. Consumer goods and tech stocks lead the way higher.
- On Thursday, European stocks rebounded after the ECB said it would—surprise!—begin to slow down its bond-buying spree by year-end, but only by a smidge. Sovereign bond yields and bank stocks jumped on the news. But don’t celebrate, bond fans. Inflation is expected to rise in the near-term.
U.S.
- U.S. futures are bouncing back this morning. Even still, it’s a near certainty the three major averages will finish the week in the red.
- Unlike last week, better-than-expected jobless claims data failed to trigger a stocks rally. Only financials, energy and materials managed to finish yesterday in the green.
- Airlines, including Southwest, United and Delta, warned investors the outlook for air travel looks bleak with Delta—the COVID variant, that is—still surging. And yet, investors sent shares in all three higher yesterday—but it appeared to be a case of buying on the dip—or, buying on the news.
Elsewhere
- Gold has topped $1,800 again.
- The dollar is down, usually a good sign for stocks.
- Crude is up this morning, but down for the week. Brent hovers around $72/barrel.
- Bitcoin is flat, trading around $46,500, off its overnight highs.
***
By the numbers
52.57
September is living up to its reputation as a tough month for stocks. The S&P 500 is on a four-day losing streak, its longest slide in over a month. That sell-off puts the benchmark in negative territory for September. Concerns over tapering, valuations, global growth and rising Delta numbers are weighing on investors. That’s the bad news. The less-bad news? The S&P is a mere 1.2%—or, 52.57 points—off its all-time high. If you’re looking for catalysts, please note: the start of Q3 earnings season is a good month away. In the meantime, there’s not a heck of a lot on the calendar to excite investors. As such, expect them to obsess over Delta numbers.
8 out of 10
As I say above, we’re about 1% off the S&P record close of 4545.85, which happened last week. That’s important to keep in mind amid this week’s lackluster performance. Just as the August rally was more a melt-up than a 🚀, the September swoon seems like a drip-drip-drip decline. But should this sell-off continue, don’t be surprised if you start to hear the R-word—recession—uttered. As Brad McMillan, CIO for Commonwealth Financial Network, noted yesterday, “recessions are strongly associated with market drawdowns. In fact, 8 of 10 bear markets have occurred during recessions.” He points out that the last one happened in February, citing National Bureau of Economic Research data. That recession was super-brief. It also occurred during one of the worst market sell-offs of 2021. As such, Commonwealth Financial Network has a “yellow light” rating on the U.S. economy at the moment.
Zero
We covered yesterday the bearish call by BofA’s Savita Subramanian. A reminder: BofA now has a 4,250 year-end handle on the S&P, which is roughly 5% below yesterday’s close. She doubled down on that outlook yesterday, telling Bloomberg TV, “The S&P 500 has essentially turned into a 36-year, zero-coupon bond… If you look at the duration of the market today, it’s basically longer duration than it’s ever been. This is what scares me.” She went on to say that any normal shock—inflation, supply chain disruptions, interest rates going up; take your pick—will make the market reaction more volatile than ever. She’s not alone in ringing the alarm. Deutsche Bank, too, is warning of a “hard” equity valuation correction.
***
Have a good weekend. But first, there’s more news below.
***
Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com
As always, you can write to bullsheet@fortune.com or reply to this email with suggestions and feedback.
Today's reads
This is not a repeat of the 2008 housing bubble—Fortune
Despite El Salvador’s bumpy Bitcoin rollout, a queue of countries forge ahead with legalizing crypto—Fortune
Some of these stories require a subscription to access. There is a discount offer for our loyal readers if you use this link to sign up. Thank you for supporting our journalism.
Market candy
Time to add bonds to your portfolio?
That's the topic of this week's "The Dividend" column, by Fortune's Jessica Mathews. Yes, Treasury yields are far below their 2019 levels, but there are some really compelling reasons to look into fixed-income assets right about now, she explains.
