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Here's the big thing holding up the stock market, says Bank of America

Retail sales and more debt-ceiling talks are the big spotlight for Tuesday, with stock futures indicating some wobbling ahead. There was also some disappointing China data that showed a slowing recovery. Dipping a toe into how investors are feeling these days is the latest fund manager survey from Bank of America. Strategist Michael Hartnett and


Retail sales and more debt-ceiling talks are the big spotlight for Tuesday, with stock futures indicating some wobbling ahead. There was also some disappointing China data that showed a slowing recovery.

Dipping a toe into how investors are feeling these days is the latest fund manager survey from Bank of America. Strategist Michael Hartnett and team reveal that investor sentiment deteriorated in May to “the most bearish of 2023” as investors lifted cash balances and got a little more negative on growth. They say that is good news — “positioning still contrarian [positive] for Wall Street.”

Worried managers are convinced that risk assets will remain “resilient so long as the [economic] landing is soft.” The below BofA chart shows nearly two-thirds of those surveyed — 63% — see a soft landing as the most likely outcome for the global economy.

And 61% are convinced the Fed has finished hiking, while 43% say perhaps not.

The next chart might explain why the market is taking that Alfred E. Neuman approach to debt-ceiling talks, baffling some on Wall Street, as 71% expect the ceiling will be raised by the so-called X date:

So where are the worries in this teflon market? A bank credit crunch and a global recession are at the top, followed by high inflation that keeps central banks hawkish.

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if there is a credit event, most of those surveyed think it will start in the commercial real estate corner.

As for where this market is looking crowded — the past month saw a big rotation out of commodities linked to those growth worries — and into stocks. The emphasis was on tech names, with an overweight that’s the highest since December 2021, alongside a move into eurozone stocks. Investors are most long on growth versus value stocks since July 2020.

No doubt, some out there have been questioning whether technology stocks can keep up the pace — the Nasdaq Composite COMP, +0.66% is still up a whopping 18% so far this year, while the S&P 500 SPX, +0.30% is up just over 7%.

For those contrarians out there, the trades would be bullish positions on real estate investment trusts, banks and value stocks, and going the opposite way of the crowd by shorting bonds, technology and growth.

Read: Why stock-market bulls must beware of ‘bogus bear-market bottoms’

The markets

Stock futures ES00, -0.16% YM00, -0.31% NQ00, -0.05% have drifted lower ahead of retail sales data, with Treasury yields  TMUBMUSD10Y, 3.488% TMUBMUSD02Y, 4.000% also moving south, alongside oil prices  CL.1, -0.10%, the dollar DXY, -0.08%, gold GC00, -0.64% and especially silver SI00, -1.36%. Turkish stocks and the lira  USDTRY, +0.18% continue to weaken on election jitters. China stocks 000300, -0.52% SHCOMP, -0.60% took a hit after retail sales and industrial production grew, but short of Wall Street hopes and youth unemployment hit a record.

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Read: A potential U.S. debt-ceiling suspension may present an upside risk for dollar, says BNP Paribas

For more market updates plus actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor’s Business Daily. And for more live updates on markets, check out MarketWatch’s Live Blog.

The buzz

Starting this week’s retail earnings, Home Depot HD, -0.66% stock is down 4% on a sales miss and weak outlook. That’s also hitting Lowe’s shares LOW, -0.84%.

On that theme, April retail sales are due at 8:30 a.m., industrial production at 9:15 a.m. and business inventories and a home-builder confidence index will come at 10 a.m.

Blue Apron stock APRN, -1.14% is up 20% after the recipe-kit maker said it has signed a letter of intent with FreshRealm for a transfer of up to $50 million to help with infrastructure.

Horizon Therapeutics HZNP, +1.13% is down 16% after a report said the FTC will block Amgen’s AMGN, +0.25% $27.8 billion buy of the biopharma. Amgen, whose shares were are up slightly, said it had no knowledge of any decision.

First-quarter holdings from hedge fund managers and other big investors rolled out late Monday. Capital One shares COF, +3.22% are up and Bank of New York Mellon BK, +1.37% is down after Warren Buffett’s Berkshire Hathaway BRK.A, +0.96% BRK.B, +0.32% said it bought the former and sold the latter. The conglomerate upped its HP HPQ, +2.32% stake, and sold off its RH RH, +1.89% and Taiwan Semiconductor Manufacturing TSM, +2.67% stakes. RH shares are down 4%.

Filings also showed Soros Fund Management sold its entire Tesla stake, as well as heavily trimming Rivian RIVN, +4.11%. That was followed by a Twitter attack by the EV maker’s CEO Elon Musk who said George Soros “hates humanity.”

Bill Ackman’s Pershing Square took a new Alphabet GOOGL, -0.85% position, and cut Chipotle CMG, +0.07%, Hilton Worldwide HLT, +1.19% and Lowe’s LOW, -0.84% stakes. David Teeper’s Appaloosa took new Tesla TSLA, -0.97% and Nvidia NVDA, +2.16% positions, and bought FedEx FDX, -0.23%, Amazon AMZN, +0.85% and other stocks. Bill Loeb’s Third Point took new Alibaba BABA, +3.52%, AMD AMD, +2.25% and Alphabet stakes, and dumped Disney DIS, +0.95%.

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Vodafone VOD, +0.54% VOD, -5.34% said its performance has been disappointing and will cut 11,000 jobs over three years. Shares are down 6%.

President Joe Biden will meet with House Speaker Kevin McCarthy and other U.S. lawmakers to discuss the debt-ceiling crisis in a meeting scheduled for 3 p.m.

And we’ll hear from a bunch of Fed folks throughout the day: Fed Vice Chair for Supervision Michael Barr will testify on Capitol Hill, then speeches from Richmond Fed President Thomas Barkin and New York Fed President John Williams, as well a TV appearance by Chicago Fed President Austan Goolsbee, who will later take part in a panel discussion with Atlanta Fed Pres. Raphael Bostic.

Russia has launched a heavy attack on Ukraine capital Kyiv on Tuesday.

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The tickers

These were the top searched tickers on MarketWatch as of 6 a.m.:

Ticker Security name
TSLA, -0.97% Tesla
GME, +4.49% GameStop
MULN, -1.57% Mullen Automotive
AAPL, -0.29% Apple
BUD, +0.02% Anheuser-Busch InBev
BABA, +3.52% Alibaba
NVDA, +2.16% Nvidia
AMZN, +0.85%
AI, +23.43% I
PACW, +17.58% PacWest Bancorp

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