PreMarket Prep: Arcing the S&P 500 in Q3 – S&P Dep Receipts (SPY)
Benzinga’s PreMarket Prep airs every morning from 8 a.m. to 9 a.m. ET. During this fast-paced and highly informative hour, traders and investors tune in to get the top news for the day, the catalysts behind these moves, and the corresponding price action for the upcoming session.
Each day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick as well as producer Spencer Israel.
The price development in the third quarter of the S&P 500 index has positive and negative points.
Mixed signals: Let’s start with the positives. The cash index was up for the sixth consecutive quarter. At its peak, the S&P was up 21% from its year-end near its September high. In addition, several issues reached new all-time highs and many by a wide margin.
Now for the negatives. The index retreated from the highest and barely closed in the green for the quarter (4,307.54 vs. 4,297.50) after a poor performance on Thursday. This drop brought the annual gain down to 14.6%, which is still a year above average.
In addition, two of the months (August and September) were in the red. In this sense, the last time the index experienced three consecutive months of decline was during the turbulent periods of January-March 2020. Of course, that was at the start of the pandemic and it is unlikely that it will happen again in the near future.
To buy or not to buy the dip? : Every correction since over the past six quarters has been a buying opportunity, so why would this decline be any different? At this point, there is no indication, based on second quarter earnings, that corporate profits have peaked or started to decline.
Keep in mind: this could change when third quarter results start in earnest on October 14, when the first of the major constituents of the index, JPMorgan Chase & Co. (NYSE: JPM).
Based on the stock’s performance in a bear market this quarter, investors expect good results. At the close, the giant bank gained 5.2% ($ 155.54 to $ 163.69). All of the gains were made in the final two weeks of the quarter as the show rose from $ 152.69 to a new all-time high of $ 169.30 in just five sessions. The issue hit its highest closing level on September 27 at $ 166.98.
The elephant in the room: Galloping inflation which would lead to higher interest rates. The main concern of investors is that the Federal Reserve Bank is underestimating the rising rate of inflation.
Most of the recent market declines follow data indicating that the Federal Reserve is underestimating the future rate of inflation.
Newsflash : Because of the growing US government debt, even a gradual increase – not to mention a rapid increase – in rates would bankrupt our country further. More importantly, the rate hike may thwart the rebound in the economy coming out of the pandemic.
The market is moving forward: Based on Friday afternoon price action, the “buy down” crowd prevailed in the premarket and did the same in the regular session. After uncovered gains, induced by Merck Inc. (NYSE: MRK) and its eroded new antiviral COVID-19, the index rebounded and was 1.15% positive at the close. We’re off to a good start.
Sure, a day isn’t a quarter, but if the index can digest the recent sell-off and the surge in volatility eases, the strong third quarter results could propel the index to its all-time high. and beyond.
If the index weakens next week, investors may want to prepare for a deeper and more prolonged pullback in the index.