S&P 500 could sell-off again next week: Art Cashin

Earlier this week, Invezz reported consumer prices to have eased meaningfully to 7.1%.

But that doesn’t necessarily mean an all clear for the S&P 500 from here on out, says Arthur D. Cashin – the Director of Floor Operations at UBS Financial Services.

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S&P 500 must hold the crucial 3,900 level

Responding to a slowdown in inflation, the U.S. Fed switched to a smaller 50 basis points hike on Wednesday. On the flip side, it now sees a terminal rate of 5.1% (higher than before) in 2023 (find out more).

The update on terminal rate has the benchmark index in the red this morning. It’s down close to a 3.0% at writing – and down any further from here, Cashin warned on CNBC’s “Squawk on the Street”, could mean another sell-off next week.

You’ve got to try and hold the 3,900 level. If you break 3,900, be careful as to how the rest of the day goes. If it develops into washout selling, that could get new selling on, not on Friday, but on Monday and Tuesday.

S&P 500 is currently testing the 3,900 level.

Morgan Stanley’s Wilson is dovish for 2023

Also on Thursday, Mike Wilson of Morgan Stanley reiterated his dovish view on the benchmark index. While he does agree that inflation will continue to ease in 2023, it’s the earnings estimates that suggest more pain ahead, he noted in a separate CNBC interview.

Inflation has peaked, we’re pretty confident it’ll come down hard next year. But the growth slowdown is not yet priced in. So, on the index level, we’re pretty pessimistic that we can support these prices.

More alarmingly, he’s not forecasting a minor miss on the earnings front. According to Wilson, earnings could fall up to 20% short of the current estimates for 2023.

His recommendation for next year is simple; avoid the index and invest in stocks you’re convinced will positively surprise in terms of earnings.