G'morning Opening Bell team. Phil Rosen here — this California sun has me feeling chipper!
But that puts me in a rare company these days.
In this economy, bears abound and optimism is as hard to spot as a week without a crypto hack.
Today, I'm breaking down why everyday traders and institutional investors alike are feeling downbeat about the stock market.
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1. Wall Street's confidence in the stock market hasn't been this low in over five years, if you go by Bank of America's Sell Side Indicator.
People look to this metric as a gauge of investor sentiment, and right now it signals that investors are bracing for a downturn.
"While the SSI does not catch every rally or decline in the stock market, the indicator has historically had some predictive capability with respect to subsequent 12-month S&P 500 total returns," BofA analysts said Wednesday.
But they also pointed out that a second signal — the Equity Risk Premium — shows markets are pricing in an 80% chance of a mild recession, and a 30% chance of a "full-blown" recession.
And optimism only drops when data points confirm forecasts. BofA had earlier predicted a recession to hit before 2023, and these moves support that hypothesis.
Now for a barometer of Main Street sentiment, let's turn to the retail trader's once-favorite app.
Seven million retail investors have left Robinhood over the past year. That's a 34% drop.
Investors are leaving the platform as equities and cryptos lose momentum from the easy-money days of the last two years.
And the platform is taking notice and making changes: Robinhood this week announced plans to cut 23% of its staff.
But amid all the pessimism, one name still draws the bull. Retail investors' enthusiasm for Tesla is the highest it's been in two years ahead of today's vote on a 3-for-1 stock split.
You can hear me talk more about this on today's episode of The Refresh from Insider.
In other news:
2. US stock futures take a breather Thursday, following a strong rally in the previous session. Meanwhile, oil dropped to its lowest level in three weeks. Here are the latest market moves.
3. On the docket: Tesla, Toyota Motor Corp., Square, all reporting. Plus, look out for the unemployment insurance weekly claims report, expected from the US Department of Labor this morning.
4. This batch of stocks is poised to stand out while recession fears make stock-picking historically difficult. David Kostin of Goldman Sachs pointed out which companies have the best shot at outperforming a market that's becoming increasingly difficult to navigate. Here is his list of 25 names.
5. The stock market's "buy the dip" regime has returned, according to Fundstrat's Tom Lee. Any reading of over 54% of S&P 500 stocks being in a bear market has historically proven to be a great time to buy the dip, the analyst said. He pointed out five factors that will drive a stock-market rally in the second half of 2022.
6. Lumber prices are falling as the market realizes housing is "going back to normal." Lumber fell 5% yesterday, to hit a new 2022 low of $495 per thousand board feet. As one housing CEO put it: "The last couple years are going to be an outlier."
7. Solana is the latest target of a crypto hack, just days after almost $200 million was swindled in the Nomad bridge heist. In 2022, hackers have targeted blockchain bridges repeatedly and have netted nearly $1 billion. Here are the full details.
8. This veteran strategy chief warned investors not to fall for the recent stock market rally. Michael Farr expects the current rebound to lose steam as recession fears climb. Instead, he recommends taking a beat from this four-part investing playbook.
9. Wealthy international buyers poured nearly $60 billion into the US housing market over the last year. Foreign customers are showing confidence in American real estate with all-cash offers even as bearish analysts are calling for a potential crash — and these buyers aren't worried about a bidding war.
10. Paypal surged 14% Wednesday after it launched a massive $15 billion stock buyback. The fintech company also received backing from Elliott Management. Now, Bank of America is forecasting a dividend to shareholders could be announced early next year.
Keep up with the latest markets news throughout your day by checking out The Refresh from Insider, a dynamic audio news brief from the Insider newsroom. Listen here.
Curated by Phil Rosen in New York. (Feedback or tips? Email [email protected] or tweet @philrosenn).
Edited by Max Adams (@maxradams) in New York and Hallam Bullock (@hallam_bullock) in London.