2020-04-22 • Updated
Most analysts believe S&P 500 is overbought and it will have a correction soon. What is the reason?
There is no secret that many large US companies have a tough time now amid the coronavirus pandemic. Goldman predicts a 15% EPS decline in the first quarter for S&P 500. That would be the largest drop in earnings reported by the index since 2009, when the decline was 15.7%.
Moreover, according to the Morgan Stanley, earnings will decrease by 20% this year. The guidance from corporations may show that the virus damage was devastating and it takes a long time to rebound. The business loan demand increased by 17.3% the previous week, what generally indicates the beginning of the recession. While major economies around the world take tentative steps toward reopening, it’s still to early to talk about their recovery.
Let’s have a look at the S&P 500 chart below. The price was declining from February 20 to March 23, then it reversed and went upward. Few days ago it reached the 50-day moving average and had a short correction down. So, it might continue increasing only if it breaks through the 50-day moving average. However, most analysts anticipate the upcoming falling down.
China has issued new oil product export quotas to allow oil companies to send surplus barrels overseas, particularly Sinopec, which has the highest volume among quota holders. While the exact quota volume remains undisclosed, oil companies are forecasted to export approximately 3.5 million metric tons of clean oil products in September, a 10% increase from August.
Thanks to the incredible advancements in horizontal drilling and fracking technology, the United States has experienced a mind-blowing shale revolution. They've become the heavyweight champion of crude oil production, leaving Saudi Arabia and Russia in the dust. They even turned the tables and became net exporters of refined petroleum products in 2011.
Oil prices rebounded slightly on Friday but are still expected to show losses for the week due to concerns about slowing growth in the US and China. US crude futures rose 2.7% to $70.41 per barrel, while the Brent contract increased by 2.5% to $74.33 per barrel.
The past several weeks have been a real triumph for the bulls in the oil market. The Brent spot price grew by 8.5% during the last month.
Gold prices are rising for three consecutive days ahead of the Federal Reserve (Fed) interest rate decision, which is expected to remain unchanged due to declining inflation and a positive economic outlook. Investors are keen on the Fed's interest rate guidance, fearing a hawkish stance that could trigger market risk aversion.
Amid concerns of a Chinese economic slowdown, reports of declining investment often overlook China's efficient investment strategy in emerging sectors for long-term growth. China has taken measures to stabilize foreign and private sector investments, like reducing the reserve requirement ratio to boost investor confidence.
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