U.S. stocks closed lower on Wednesday following weak earnings results from Target. The S&P 500 dropped 0.83%, the Nasdaq dropped 1.54%, and the Dow slumped 0.12%. Sam Stovall, Chief Investment Strategist at CFRA, joined Cheddar News' Closing Bell to discuss.

Closing Bell

U.S. Stocks Close Lower After Dismal Retail Earnings

well, turning back to the major indexes joining me now is SAm Stovall chief investment strategist at CFR A SAM good to see you, especially on a day like today and sort of in this pivotal time for the stock market. We were lower today. But what is your outlook for the rest of the year? Well, I'm not surprised that we're down a bit today. I think we might even have hit a bit of an exhaustion point recently because since the end of september, the S and P has been up more than 10.5% all sizes, styles and sectors have been in positive territory along with 95% of the 150 sub industry. So I think that we're just Hitting an exhaustion phase, but I do think that the trajectory is higher for the end of the year, especially as you were just describing a minute ago. What the outlook is for the Fed meeting in December and our belief is that they will hike by 50 basis points, not the 75 as earlier predicted. Okay, well, that would be good news. Sam does that mean that the low in the stock market might be behind us? Thank you for saying might be because yes, uh, we're down a little more than 25% and whenever we have had a milder than expected bear market, we have not seen the spike in capitulation that we normally do with your normal or deep bear markets. So we have not seen that spike this time around, but we didn't see it in some of the other 25% or lower bear markets. So we might end up missing at this time as well? Well, I think that's good news. Right. I mean the fact that the Fed is going to slow his pace of rate rises, we know at least the stock market likes that. I mean what it means for the economy, inflation and consumers budgets might be a whole nother story, but at least inflation is taking a little bit lower as the chief investment strategist SAm at C. F. R. A. Do you think inflation can continue to come down? Yes, I do. When we look to the inflation rates, expectations are for the headline rate to just hover around 7% uh, with the December reading and then work its way to the mid-2% area by the end of 2023. Now that's certainly not the goal that the Fed would like. But our belief is that the Fed will continue to raise 50 basis points in february of next year and another 25 basis points possibly with a terminal rate being between five and five and a quarter. But then they'll pause and then Wall Street will start to anticipate when they'll start to ease once again. And maybe that will be a year from now. Another question that I have for you is what should we make of this missile that was fired on the border of Ukraine and Poland did kill two people. Obviously, we're still kind of waiting to get more clarity as to who might have been behind it as reports come in. But what sort of risk does the ongoing war in Ukraine pose? The stock market? Well, we saw just the other day, the market was in the green. And then when the news about those missiles, uh, struck the wires, then the market turned right around because the market does not like this kind of uncertainty. It might not lead to a worsening of the global recession or at least the global slowdown. But typically it does lend itself to short term volatility. So right now now the word seems to be spreading that it was an anti missile or anti device that the Ukrainians had used. But we'll have to wait to see what happens. I think most of the world would prefer that it was an errant missile that was originated from Ukraine rather than starting from Russia because then there would have to be a NATO response that I don't think anybody really wants to escalate. I would absolutely agree with you. The timing of it all. Yesterday was really interesting as well as the stock market was starting to kind of rip there on the back of that producer price index. We are going to get another chipmaker reporting after the close today saying that's in video, one of the key semiconductor stocks out there. This sector is well underperformed. Even though I think everyone has accepted the fact that semiconductors are crucial to technology and economic growth going forward is the semiconductor space. With the sell out that we've seen look attractive to you. Well, I think we're getting to that point, earnings are expected to be off for the full quarter, close to 17% for the semiconductor group. But semiconductor equipment companies, which tend to be early responders versus the semiconductors them. So usually we see the semiconductor equipment groups bottom and start to work their way higher. First, they're expected to post about a 5% gain in earnings for this quarter, uh, and then possibly see an improvement as we move into 2023.