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By Jeffrey
Cane | Wednesday, March 23
Retreat. The current bull run
kicked off two years ago today, overturning a brief pandemic-induced bear
market. It has been the strongest two-year rally for the S&P
500 -- up 99% -- since 1937. The coming year could
be difficult, however.
"Year three of bull markets tend to be a little tamer, with the larger
gains happening in year one and two,” says Ryan
Detrick, chief market strategist of LPL Financial, noting
that out of the 11 bull markets since World War II, three of them ended
during year three, "while the ones that didn’t end, saw an average gain
of only 5.2%.”
Tame was the word today as stocks pulled back from yesterday's strong rally,
ending near their lows for the day. Treasury prices recovered,
sending their yields lower after a recent run-up. The yield on the two-year
Treasury note settled at 2.113%, while the 10-year yield slipped to 2.320%.
The rally in oil resumed, with the global benchmark Brent crude
topping $120. A report on U.S. oil inventories confirmed "fears that
there is less oil available in storage just as people start traveling
more," Avi Salzman of Barron's
wrote today. The prospect of further restrictions on Russian energy exports
also heightened concerns over supply. Avi has more here.
Crude oil, based on U.S. WTI futures, surged 5.2%, to settle at $114.93 a
barrel, its highest level since March 8. Oil stocks were the big
winners today: Hess (up 4.6%), Diamondback
Energy (up 3.9%), and Marathon Oil
(up 3.7%). The Energy Select Sector SPDR
exchange-traded fund gained 1.7%.
The S&P 500 closed down 1.2%, with energy and utilities the only advancing
sectors. The Dow Jones Industrial Average
and the Nasdaq Composite both ended
down 1.3%.
Adobe shares tumbled 9.3%. After the market close
yesterday, the software company gave a
disappointing outlook for its current quarter. Okta
fell 6.5% after disclosing
that it was investigating a digital breach. That stock has now fallen 12.3%
over the last two days.
Meanwhile, on Planet Meme Stock, GameStop shares rose 14.5%
after a securities filing late yesterday showed that Chairman Ryan
Cohen had bought
more than 100,000 more shares, raising his stake in the videogame
retailer to 11.9%. GameStop shares have soared 49.7% in the last two
sessions. Brother meme stock AMC Entertainment Holdings rose
13.6% today.
Back in the real world, investors remain worried about inflation, about
central bank tightening to control that inflation, about the energy and
supply-chain repercussions of Russia's invasion of Ukraine -- and whether a
combination of all that is enough to tip the U.S. into a recession.
It's a delicate balancing act for the Federal Reserve, one that Mark
Haefele, chief investment officer of UBS Global Wealth
Management, still thinks is possible. In a note yesterday, he wrote:
We still see a path to
markets ending the year higher. Although there is widespread criticism, it’s
too early to take the view that the Fed
won’t be able to negotiate the fine line of reducing inflation without
derailing growth. ... We recommend investors brace for higher rates,
considering exposure to U.S. senior loans and equity sectors that typically
outperform in this environment, such as value and financials.
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