After the shock that the American economy was exposed to
yesterday due to inflation data, the Producer Price Index data was released in
America a short time ago to confirm the predicament of the economy, which
ranged between stability, rise and slight decline, but in all cases it remained
high, which confirms the predicament of the economy. As these negative data
push the Fed towards more aggressiveness and tightening in its monetary policy,
which led some to expect a full 100 point hike.
Producer Price Index data
The annual PPI rose by 8.7%, and experts had expected it to rise by 8.8%.
Also, the Producer Price Index recorded on a monthly basis about -0.1%, which is what experts expected to record -0.1% on a monthly basis.
Also, the core PPI (excluding energy and food) rose on an annualized basis by 7.3%, less than experts' expectations for a rise of 7.6%.
On a monthly basis, core PPI (excluding energy and food) rose 0.4%, above expectations of 0.3%.
When manufacturers pay more for goods and
services, higher costs are more likely to be passed on to the consumer, and
thus the PPI is thought to be a leading indicator of consumer inflation. The
PPI is taken into account to a large extent, and when it comes to readings at
its peak, its impact on the market is equal to that of the CPI.
Expectations of a bigger collapse
Yesterday, the US markets witnessed strong declines, incurring huge losses on the impact of inflation data, and the US indices entered the red zone to record strong declines at the start of the session.
Morgan Stanley, one of the world's largest and most well-known providers of investment and wealth management services, expects US stock markets to fall further in the next few months.
The latest reports from Morgan Stanley said the US S&P 500 is expected to fall by an additional 17%-27% within the next four months.
The S&P 500 is already down 14% year-to-date, but Morgan Stanley believes the market hasn't hit the bottom yet.
bear market
A team of Morgan Stanley analysts, led by Mike Wilson, wrote in a recent note to investors: “2022 now represents a modest earnings contraction (-3% annual growth), although we do not include a recession in this scenario.”
The analysts added, "Acknowledging the weak performance in equities year-to-date, we don't think the bear market is over if our earnings forecasts are correct."
Despite the pessimistic forecasts, Morgan Stanley analysts
believe that Wall Street will still retain some strong and attractive stocks,
among them (LLY), a stock of a giant American pharmaceutical company with a
market value of about $300 billion, with its products being marketed in 120
country around the world.
S&P500 Index
Analysts expect the S&P 500 to fall to 3,400 by the end of the year.
And in the event of a recession in the economy, they say the benchmark could drop to 3,000 points
Given that the S&P 500 is around 4107 at the moment, Morgan Stanley forecasts a further decline of 17% to 27%, analysts say.
The Fed will be savage
“The bank will probably exaggerate that," Cathy Wood said during the company's monthly market webcast, which was picked up by Market Watch.
According to the executive, the Fed will "let something fall apart first," including hiring. For Wood, hiring is already bad news, especially among small businesses, and it confirms her view that America is already in a recession.
For example, she noted that the prices of raw materials such as oil, timber and copper are dropping sharply from their highest levels.
Wood made the comments amid investor concerns that the Federal Reserve will have to maintain its sharp pace of monetary tightening to combat high inflation.
Many investors fear that the central bank risks triggering a
recession if it raises interest rates too quickly.