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The pandemic-era rally is now a distant memory for some stocks

<i>Spencer Platt/Getty Images</i><br/>Traders work on the floor of the New York Stock Exchange (NYSE) on May 12. Bank shares have dropped below where they stood in February 2020
Getty Images
Spencer Platt/Getty Images
Traders work on the floor of the New York Stock Exchange (NYSE) on May 12. Bank shares have dropped below where they stood in February 2020

By Julia Horowitz, CNN Business

US banks had a stellar run in late 2020 and 2021. Stocks in the sector soared roughly 80%, powered by the strong economic recovery and the promise of higher interest rates, which would allow them to make more money on loans.

Now, it’s like the rally never happened. Bank shares have dropped below where they stood in February 2020, erasing all their gains from the pandemic-era market boom.

It’s not just banks. The post-lockdown winning streak for cloud computing companies has been completely wiped out. The same goes for payment firms like Square parent Block and PayPal. Netflix shares are at their lowest level since late 2017.

Stocks staged a healthy rally on Friday. But the consensus view on Wall Street, for now, is that the sell-off likely has further to run, as losses pile up.

“Stocks appear to have begun another material bear market rally,” Morgan Stanley equity strategist Michael Wilson told clients on Sunday. “After that, we remain confident that lower prices are still ahead.”

Wilson is known for his bearish leanings. But he’s not the only one to hold this position, as fears about rising interest rates and the possibility of a recession — which would hurt corporate earnings — hang over investors. Plus, stocks may have gotten a lot cheaper, but they’re still not cheap.

“For most investors, trying to time the market is likely to prove time-consuming and loss-making,” Mark Haefele, chief investment officer at UBS Global Wealth Management, said Monday. “Investor sentiment is fickle, and markets are likely to remain choppy until we get greater clarity on the 3 ‘Rs’ — rates, recession and risk.”

Michael Hartnett, the chief investment strategist at Bank of America, has been tracking an “exodus” of capital from the market. He recently told clients that the sign of “true capitulation” is when investors sell “what they love,” and noted that Apple, long a fan favorite, recently dropped more than 20% below its recent high.

“Are we there yet? No,” he said late last week. “Stocks [are] prone to [an] imminent bear market rally but we do not think ultimate lows have been reached.”

One exception: Goldman Sachs said it thinks “the worst of the decline is likely behind us” — so long as a recession is avoided.

Still, it recently slashed its year-end price target for the S&P 500 “to reflect higher interest rates and slower economic growth than we previously assumed.”

JetBlue is turning hostile in its bid to buy Spirit

JetBlue is going hostile in its effort to acquire Spirit, the latest twist in an industry battle for the low-cost carrier.

Spirit previously rejected a takeover offer from JetBlue, favoring an earlier deal to merge with fellow budget airline Frontier.

Now, JetBlue is appealing directly to Spirit’s shareholders, urging them to vote against the Frontier deal while launching its own all-cash offer of $30 per share, my CNN Business colleague Allison Morrow reports.

JetBlue said in a statement Monday that its offer represented a 60% premium to the value of the Frontier transaction. The airline added that it was willing to negotiate a $33-per-share deal if Spirit agrees to provide information about its business that JetBlue claims has been withheld.

Shares of Spirit are up 14% in premarket trading, rising to more than $19 apiece.

Quick rewind: In February, Spirit agreed to be acquired by Frontier in a cash-and-stock deal that at the time valued Spirit’s shares at $25.83 each.

JetBlue entered the picture in April, but Spirit ultimately rejected its all-cash offer of $33 per share.

The bid couldn’t be taken seriously because the company didn’t expect that regulators would ultimately sign off, Spirit CEO Ted Christie told analysts earlier this month.

“It stretches any sort of common sense to believe that an acquisition of Spirit by JetBlue would be approved by the DOJ,” Christie said, noting that the Department of Justice has already come out against JetBlue’s alliance with American Airlines in the northeastern part of the United States.

Top dealmaker says Chinese markets are ‘close to the bottom’

Plenty of people on Wall Street are convinced that US stock markets will keep falling. But is China a different story?

That’s what one of the country’s top investment bankers thinks.

“I do believe the market is close to forming the bottom now,” China Renaissance CEO Fan Bao told CNN Business.

He acknowledged that overall investor sentiment “is pretty bad.” Still, he believes the world’s second largest economy remains a promising place to park money, despite a slowdown in economic growth and pressure from President Xi Jinping’s “zero Covid” policy.

“We’re actually seeing this as a great investment opportunity,” said Bao, sitting in front of a sign in his Hong Kong office that read: “BullMarket4ever.”

He added that his Beijing-based firm, which invests in startups through several funds, had recently been able to cut deals at valuations slashed to half of what they used to be.

“I don’t think people need to panic,” he continued.

That said: China Renaissance, which manages $7.7 billion in assets, has slowed its pace of new investments this year.

Up next

Warby Parker reports results before US markets open. Take-Two Interactive follows after the close.

Also today: The Empire State Manufacturing Survey posts at 8:30 a.m. ET.

Coming tomorrow: Economists forecast that US retail sales for April grew by 0.8% month-over-month, ticking up slightly.

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