The rally in US equities could come to a sputtering halt as corporate earnings drop sharply and the labor market weakens, according to Bank of America Corp.’s Michael Hartnett.
(Bloomberg) — The rally in US equities could come to a sputtering halt as corporate earnings drop sharply and the labor market weakens, according to Bank of America Corp.’s Michael Hartnett.
The strategist, who correctly warned last year that recession fears would fuel a stock exodus, said shares are pricing in a profit decline of “just” 4%, and reiterated his call to sell the S&P 500 Index above 4,200 points. That’s less than 2% higher than the latest close.
“We stay bearish as economic ambiguity of 2023 set to end with crack in labor market and EPS recession,” Hartnett wrote in an April 27 note. The risks of a hard landing for earnings and “no landing” for interest rates remain high, he added.
After a 7% rally in the first quarter, US stocks have meandered in April, with worries about a recession fueled by rising Federal Reserve rates warring with a better-than-feared start to the earnings season. Still, shares rallied on Thursday as solid results from Meta Platforms Inc. reinforced optimism on tech heavyweights.
Technology stock funds had inflows of $1.2 billion in the week through April 26, the biggest since November, according to BofA citing EPFR Global data. Chinese stocks also had the largest addition since January 2022, at $6.1 billion.
Other highlights include:
- Global equity funds saw inflows of $23 million, while $52.3 billion entered cash funds and $7.4 billion was added to bonds
- US stocks had outflows for a second straight week at $2.7 billion, while $3 billion left European funds — the seventh straight week of redemptions
- By style, US large cap had inflows of $500 million, while small cap, growth and value saw outflows
- Financials had the second-biggest sectoral inflows after tech; energy and materials saw the biggest redemptions
–With assistance from Michael Msika.
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