Wall Street Is So Terrified, Stocks Might Be Ready to Rise

Federal Reserve Chair Jerome Powell

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To paraphrase Monty Python, the stock market isn’t dead quite yet.

Sure, it feels like the

S&P 500
has nowhere to go but down. The index dropped 4.9% last month, its worst April since 1970, and sentiment toward stocks remains terrible, with just 16% of respondents in a sentiment survey by the American Association of Individual Investors calling themselves bullish.

With numbers like that, you’d expect to see fundamentals crumbling. They haven’t. About 80% of companies have reported better-than-expected profits this earnings season, while margins of non-bank companies, at least, have increased from the fourth quarter despite higher inflation.

The real damage to the stock market has come in the form of the S&P 500’s valuation, which has fallen to 17.7 times 12-month forward earnings, down from 21.5 times at the start of the year. That drop in what investors are willing to pay for future earnings is what has caused the S&P 500 to tumble 13% to start the year, the worst four-month decline since 1939.

That makes sense, considering the ultra-hawkish talk emanating from the Federal Reserve, which is trying to tame inflation. The abrupt shift from “take it slow” to “whatever it takes” caught investors on the wrong side of the trade. And with the Fed set to increase rates by half a percentage point on Wednesday, there could be more downside ahead.

But the market is so terrified right now, it’s possible to imagine the rate decision—and the Fed’s commentary around it—being less scary than investors imagined.

If that’s the case, this stock market may have some life in it yet.

—Ben Levisohn

*** Join Barron’s senior managing editor Lauren R. Rublin and deputy editor Ben Levisohn today at noon as they discuss the outlook for financial markets, industry sectors, and individual stocks. Sign up here.


Coming This Week: Fed’s Rate Decision and April Jobs

Two key economic data points will be released this week, amid earnings from more than 150 S&P 500 companies: the Federal Reserve’s Federal Open Market Committee meeting’s monetary policy decision on Wednesday, and the Bureau of Labor Statistics’ April jobs report, out Friday.

The FOMC on Wednesday wraps up its two-day meeting on monetary policy with a decision about the central bank’s decision on interest rates. The market pricing overwhelmingly expects that interest rates will increase by half a percentage point, to between 0.75% and 1%.

On Tuesday, the Bureau of Labor Statistics will release its Job Openings and Labor Turnover Survey for March. Economists forecast that the U.S. will have ended March with 11.4 million job openings, 134,000 more than in February.

Also Wednesday, ADP releases its National Employment Report on private-sector employment for April. Economists expect the economy to have gained 350,000 private-sector jobs in April, after a 455,000-job bump in March.

What’s Next: Economists are looking for the BLS’ April jobs report on Friday to show a gain of 375,000 in nonfarm payrolls, less than the 431,000 jobs the economy added in March. The unemployment rate is expected to stay at 3.6%, with more jobs than job hunters.

Nicholas Jasinski and Janet H. Cho


Highlights From Berkshire Hathaway’s In-Person Annual Meeting

Tens of thousands of devotees pilgrimaged to Omaha this weekend to hear investor and

Berkshire Hathaway

CEO Warren Buffett share his folksy anecdotes and life advice, to scoop up shareholder-only discounts, and swap stories live and in-person after two years of meeting online.

First-quarter operating earnings rose less than 1% from the same period in 2021, to about $7 billion. Berkshire slowed the pace of its stock buybacks, to $3.2 billion, but snapped up $51.9 billion in other companies’ shares and sold $10.3 billion of non-Berkshire shares.

Berkshire found some large opportunities this year, including an $11.6 billion agreement to acquire insurer

and billions of dollars in shares of


Occidental Petroleum




Activision Blizzard
Berkshire ended the quarter with $102.7 billion in cash.

Buffett, who lamented about few attractive stock opportunities in his Feb. 26 annual letter, said over the weekend that Occidental’s capital-return plans and higher oil prices after Russia’s invasion of Ukraine made its stock a buy, and that Alleghany fit well with Berkshire’s insurance operations.

Asked about Geico’s sharp decline in profit, Vice Chair Ajit Jain acknowledged that

profit margin and growth rate surpassed Geico’s, because of Geico’s later start in adjusting customers’ rates based on how they drive. He said Geico was seeing promising early results from its competing DriveEasy programs.

What’s Next: Buffett said no one can know how much inflation will climb, and the best defense against inflation is to be skilled at what you do, saying if you provide something valuable that people are willing to pay for, “it doesn’t matter what the U.S. dollar does.”

Nicholas Jasinski and Janet H. Cho


Pelosi Pledges U.S. Support for Ukraine ‘Until Victory is Won’

House Speaker Nancy Pelosi pledged U.S. support for Ukraine “until victory is won” against Russia, a day after she and a delegation of Democratic lawmakers secretly visited Kyiv to meet with Ukraine President Volodymyr Zelensky. Pelosi said they met to show the world that “America stands firmly with Ukraine.”

Zelensky asked for more security, economic and humanitarian aid from the U.S., two days after President Joe Biden asked Congress to approve another $33 billion in aid.

The American delegation of House Democrats also met with Poland’s President Andrzej Duda and other senior officials, to thank them for their dedication and humanitarian efforts, including taking in more than 3 million Ukrainian refugees, Pelosi said.

Zelensky tweeted Sunday that the evacuation of about 100 civilians from a steel plant in Mariupol had begun, saying they were headed to another spot in southeast Ukraine. The U.N. and the International Red Cross are working with Ukraine to evacuate more civilians.

Germany, Europe’s largest economy, expects to be independent of Russian oil imports by late summer. It has cut its Russian oil imports to 12%, coal to 8%, and natural gas to 35%, said German Economy and Climate Minister Robert Habeck, the Associated Press reported.

What’s Next: The Russian Association for Electronic Communications expects 100,000 tech workers to leave Russia over the next month, after as many as 70,000 have left since the Ukraine invasion, the Washington Post reported. The nonprofit Ok Russians estimates 300,000 Russians overall have departed.

Janet H. Cho


Travel Company Earnings Could Measure Recovery’s Progress

The recovery in leisure and tourism will be on display this week with earnings reports due from hotel alternative

travel planning website

Booking Holdings

and cruise operator

Royal Caribbean

as Covid-19 restrictions continue to melt away around the world.

On Sunday, Italy’s health ministry eliminated the “green” pass that was required to enter restaurants, movie theaters, gyms and other spaces, though it is still required to enter hospitals and nursing homes. People entering Italy don’t have to fill out the EU passenger locator form, either.

Italy also dropped many indoor masking mandates except for public transportation and movie theaters. Greece lifted Covid-19 rules for international and domestic flights except for masks, which still have to be worn on planes and in airports, the Associated Press reported.


executives said online search for “beaches and islands” was up 27% in the first quarter from the same period in 2019, while searches for “vacation rentals” were up 37%. Searches for passport rose 80% from the same period last year.

Airbnb reports earnings on Tuesday. Analysts expect a 25-cent loss per share on revenue of $1.4 billion, which would be down from Q4’s $1.5 billion. Booking Holdings reports Wednesday, with analysts forecasting EPS of 89 cents on revenue of $2.5 billion, down from Q4’s $2.9 billion.

What’s Next: Royal Caribbean will bring two Alaska ships into operation this week and another in the Mediterranean later in May. On Thursday, the company is expected to report a $4.46 loss per share on revenue of $1.1 billion, which would be up from $982 million in the fourth quarter.

Liz Moyer


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—Newsletter edited by Liz Moyer, Joe Woelfel, Stacy Ozol

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