What needs to happen for the stock market to go down, according to Goldman Sachs strategists


The apartment is vacant. Big Tech is slowing down. Even in Coca-Cola KO,
CEO James Quincey, who surprised the uptick for the third quarter, noted that “some changes in consumer behavior continue.”

So, of course, the US stock market starts to rise with the S&P 500 SPX.
Up to five in the last seven sessions, though it could be tough on Wednesday after the Alphabet and Microsoft results. The market is looking at a time when the Fed sees the need to cut rather than raise interest rates to stifle the economy.

Strategists at Goldman Sachs say the move is premature. “We do not think the pressure for tighter fiscal conditions is over, as we have clearly not met either of the two conditions we see as necessary for sustained change – the elimination of credible inflation or the transition to an outright recession.” say.

The strategists – Kamakshya Trivedi and Dominic Wilson – say there has been, in their words, “confusion” against both conditions. “Thus, the threshold for some near-term relief is lower after a sharp tightening,” they said.

But the point is that inflation news can still disappoint. “If the Fed slows growth and subsequent inflation news disappoints, energy prices rise significantly or financial conditions weaken sharply, they may find themselves relatively quickly pulled back against the market or at risk of worrisome pressure on back-end yields. So, unless inflation news improves convincingly, we could still find ourselves behind [financial conditions] will return relatively quickly,” they said.

Another major risk is the development of a severe recession. They say no asset is priced for a big drop, even though exchange rate markets and the U.S. dollar are priced more than stocks or corporate credit.

The strategists said, “The broader case for US stocks does not look very strong, and the normal conditions for an equity hole are not yet clear. Stocks have not fully reflected the recent rise in real incomes, and any significant easing in fiscal conditions through higher stocks is likely to be offset by policy in the end.”

Markets

US stock futures ES00

NQ00
Although the Dow industrials YM00 fell sharply
the deal wasn’t that bad. USD DXY
The British pound is lower thanks to a big rally in GBPUSD
euro as EURUSD
Exceeded $1. The yield on the 10-year Treasury note: TMUBMUSD10Y
It fell to 4.08%.

Buzz

Google Home Alphabet GOOGL
It fell 6% in premarket trading as the company reported lower-than-forecast revenue, hurt by weakness in online ad spending. Microsoft MSFT
shares also fell 6% due to slowing revenue from its cloud business Azure, as the company guided for a nearly 30% rise in cloud revenue in the current quarter.

Amazon AMZN,
Amazon Web Services was pressured by Microsoft results for its cloud business, according to a report Thursday.

Facebook home Meta Platforms META
reports after closing.

Intel’s INTC
self-driving unit, Mobileye MBLY,
It priced its IPO at $21, up from $18-20 per share. Texas Instruments TXN
lowered guidance for the fourth quarter.

The advanced goods trade report showed a 6% increase in the September deficit, a 0.8% increase in wholesale inventories and a 0.4% increase in retail inventories. New home sales should be released shortly after opening.

The UK has delayed its fiscal plans until mid-November on the second day of Rishi Sunak’s prime ministership.

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