Biden economy sparks new market routing for outlook on growing alarm

That alarm is reflected in the stock market’s turbulence, with the Dow Jones Industrial Average plunging more than 800 points on Tuesday and the Standard & Poor’s 500 Index dropping nearly 3 percent. The Dow has fallen for four straight weeks in a row and the S&P 500 for three straight weeks.

“Senior management is out there just as clueless as we are,” said Jack Ablin, founding partner at investment firm Cresset Asset Management.

Some of the country’s biggest executives don’t deny it.

“Look, no one knows,” JPMorgan Chase CEO Jamie Dimon said on the bank’s recent earnings call, referring to the path of interest rates – perhaps the biggest unknown hanging over the economy. “And certainly, not everyone does their forecast.”

Dimon sounded bullish at times, as have other corporate titans, reflecting on the best case – one Democrats are counting on – that could materialize. “The consumer has money. They pay down credit card debt, ”he said. “Confidence is not high, but the fact is that they have money, they’re spending their money.”

But some of that money is drying up as the impact of federal stimulus funds fades away. It’s already showing up in slowing retail sales, which have been booming with the return of many Americans to the workforce.

The CEO of a Fortune 100 company that just turned in solid earnings said the economy is mostly strong now, but he is not confident about the rest of the year.

“There is still a lot of cash in the system and there is real upward pressure on wages,” the CEO said. “But inflation is very real, and the Fed is already very late. We’re going to have an economy that’s not robust. And you’ve got a lot of people with inflation now who have never had a deal with their lifetimes before. That’s a concern. ”

So can Fed policymakers – who are expected to raise their rates at their meeting next week – to deliver on their promise of slowing inflation or stalling?

“Who knows?” The CEO said in exasperation.

On Monday, the game maker Activision Blizzard, which boomed as many people as it did inside the quarantine, reported net game bookings of $ 1.5 billion – down from $ 2 billion at the same time last year. The shares once traded above $ 100 back in early 2021. Now they are about $ 77.

President Joe Biden and the Democrats manage the nation’s finances – especially on inflation, now at a four-year high.

That skittishness also suggests that investing in a second quarter and beyond, slowing growth, limiting further employment gains and making the incumbent party’s electoral job even harder.

CEOs minds at the top? The impact of high inflation and continued disturbance on their products.

Kirk Crews, chief financial officer at solar firm NextEra Energy, talks about an April 21 earnings call of “inflationary pressures and uncertainty in the solar supply chain.” His own products – solar panel systems – are meant to be partly offset cost shocks such as oil, gas and other traditional sources of energy.

It’s still early in the earnings season, with about 27 percent of companies reporting on the S&P 500 quarterly results, according to financial data company FactSet. Of those reporting, 80 percent issued a positive “surprise” in earnings per share. (A surprise is a performance that’s above or below what Wall Street analysts expected).

Still, earnings growth of 7.2 percent for the quarter will be the S&P 500 companies for the fourth quarter of 2020, according to FactSet.

To date, 15 S&P 500 companies have issued the second quarter for guidance issued (eight negative vs. seven positive). The number issuing positive earnings forecasts could rise as much as the remaining 73 percent of companies report, but the trend is not encouraging.

The National Association for Business Economics’ most recent survey on business conditions, released April 25, “reflects the smallest share of panelists reporting rising profits since October 2020.” The NABE survey: Most businesses reported increased sales. But higher profits for the second quarter are expected.

Some companies are crushing expectations but still sounding warnings about the economy.

Tesla on April 20 said it could easily beat projections and net income in the company’s best results for years. But Tesla and CEO Elon Musk also spoke about their concern for the rest of the year.

“Our own factories have been running down the supply chain for several quarters as the main limiting factor, which is likely to continue through 2022,” the company said in a statement accompanying its earnings report.

While the overall US earnings numbers look decent so far, a good chunk of the profits are coming from sky-high prices on capitalizing giant energy companies.

And there have been huge misses that shook the market.

Netflix saw its stock plunge at 30 percent after opening the streaming video service reported a net loss of 200,000 subscribers when it had a projected gain of 2.5 million. The other analysts are wondering if other companies are soared when the Covid-19 might lose some altitude as the pandemic winds down and inflation cuts into monthly budgets.

Microsoft and Google-parent Alphabet on Tuesday, Facebook-parent Meta Platforms on Wednesday and Apple and Amazon on Thursday.

But a commentary from a group of top executives from Tech to Banking and Construction shows concerns about the rest of the year.

“While US unemployment levels are low and wages are rising, inflation is at their highest,” said David Solomon, CEO of Goldman Sachs, on the company’s April 14 earnings call. “We’re seeing new pressure on supply chain and commodity prices, and US households are facing rising gas prices as well as higher costs for food and housing. We’ve also seen an increased risk of stagflation and mixed signals on consumer confidence. ”

The consumer, no longer enjoying vast federal benefits, may not be able to keep things afloat much longer.

“If inflation continues to rise like this and wages don’t rise as fast, then something is going to roll over,” said Ross Mayfield, an investment strategy analyst at money management firm Baird. “The consumer won’t survive it.”

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