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Home / Business / A bear market catalyst is waiting for stocks, UBS warns

A bear market catalyst is waiting for stocks, UBS warns



If you had listened to some statisticians, you might have seen Monday's bullish session, and a new record for the S&P 500

SPX, + 0.56% ,

comes from a mile away.

Aside from historical patterns of walking, Wall Street had encouraging trade requirements and revenue on its part. But Tuesday looks tougher when investors face disappointing results from Alphabet, Google's parent company, while Apple

AAPL, + 1

.00%

and Facebook

FB, + 0.80%

report earnings on Wednesday.

We are also one day away from a potential interest rate cut from the Federal Reserve. Expectations for this have been credited by someone for helping stocks rebuild strength since October's rocky start.

But our conversation from from strategists at UBS warns that a major threat lies in stocks: earnings expectations.

"Every bear market over the past 50 years has witnessed an actual decline in the future revenue of the S&P 500," said lead strategist Francois Trahan, who puts out a deteriorating landscape in a note to clients.

He states that consensus growth in S&P 500 forward year-on-year earnings has dropped to just 1% from a peak of 23% in September 2018. And leading economic indicators, which predict future activity and may provide clues to future earnings trends , also suggests more weakness going forward, as this chart shows:


"Ultimately, the most vulnerable macro background for equities arises when future earnings growth becomes negative as LEIs trend downward (pushes [price-to-earnings] lower)," says Trahan, who offers Another ominous chart:


He also suggests that investors do not expect the Fed to throw stocks a lifeline here because interest rates and equities are positively correlated for the time being, which means if interest rates are lower stocks will follow, which was the reaction after the the last two cuts.

Market

Dow

YM00, -0.16% ,

S&P

ES00, -0.09%

and Nasdaq

NQ00, -0.03%

futures do not show much movement, while European stocks

SXXP, -0.41%

is in the red. Asian markets

ADOW, + 0.51%

ready mixed.

The chart

Plant-based meat alternatives have been furious, but shares for one large company in that place, Beyond Meat

BYND, + 4.56% ,

received a bad reception late Monday for the first profit in the company's history, as our overview of the day shows.

MarketWatch

As of Monday's close, Beyond Meat shares, which debuted on Wall Street in May, are down 55% from a high of $ 234.90 on July 26.

MarketWatch

A Brief History of Beyond Meat
The buzz

Revenue from printer and copier manufacturer Xerox

XRX, + 0.92% ,

pharmaceutical companies Merck

MRK, -0.07%

and Pfizer

PFE, + 1.39% ,

General motors

GM, -0.27%

and food company Kellogg

K, + 0.28%

rolls in. After completion, results from biotechnology will be Amgen

AMGN, + 0.97%

AMGN, + 0.97% ,

video game maker Electronic Arts

EA, + 0.43%

and toy manufacturer Mattel

MAT, + 1.28%

due.

Shares of Alphabet

GOOGL, + 1.95%

is turned off after a loss of income (read all about the company's recent spending phase). And stock in the online food delivery group Grubhub

GRUB, -1.07%

is off because of disappointing results.

See BP

BP, -0.28%

BP, -3.37%

shares after the oil and gas giant swung to a hefty loss.

Pacific Gas & Electric

PCG, -24.00%

states that the power lines may have started two fires; It will cut more electricity on Tuesday as more fires burn across the state.

The Economy

Case-Shiller housing prices, consumer confidence and pending home sales are all ahead. A two-day Fed meeting, which is expected to yield a cut in interest rates, is also starting.

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