Published February 4, 2022
Stocks remain troubled. The past ten trading days have seen the market pushed all over the place with huge swings depending on whether investors were pleased by company earnings reports. Pandemic favorite Netflix issued soft subscriber growth guidance and was hammered – giving up two years’ worth of stock gains.
Microsoft provided a helpful counter. The bellwether software/consumer goods company outperformed estimates and cheered investors. But the stock, opening higher by +8% after the earnings, saw that gain cut in half by day’s end. Apple then delivered a tremendously positive quarter to investors. The largest company in the stock market halted the January swoon and kicked off a four-day rally. Then, this happened:
Facebook, now Meta, tumbled over -20% as their base of customers shrank for the first time. It was the largest single-day loss of market value in the stock market’s history – a very cold $232 Billion. The Nasdaq slid almost -4% to bring an ugly halt to its recent rise.
All of this volatility reflects a market that has very little confidence in its projections of earnings and interest rates. In that environment, price has very little to cling to. So, stocks fly around acting as if every piece of information is brand new and completely unexpected. Take the price of SNAP below. The stock continued its selloff after the Meta/Facebook news only to report its first profit EVER the following day. Did no one have a clue that this profit was coming? Apparently not, the stock shot higher by +50% after falling almost -30% from the highs only one day before.
It’s like driving through a blinding fog. As we get into the March-June quarter, the Fed will start down the path of raising interest rates and maybe the fog clears a little bit. For now, investors clearly have few clues and zero confidence in much of anything. The proverbial Wall of Worry is plenty high.
Market Update
Stocks surged higher to begin the week bringing a positive end to a dismal month of January. The +1.9% rally carried over from the prior Friday’s bounce as investors looked to scoop up bargains created after three weeks of selling and rebalance portfolios. Tuesday brought a third straight day of positive results with the S&P lifting +0.6%. Wednesday added another win for the bulls as Google parent, Alphabet, delivered powerful earnings growth. However, the +0.5% gain for the Nasdaq was half of the day’s peak as the four-day rally looked to be tiring. Very disappointing results from Meta Platforms, aka Facebook, crushed stocks Thursday. The Nasdaq heavyweight stock slumped -26% leading to a broad selloff. The more diversified S&P 500 closed down -2.4%. Strong earnings from Amazon combined with a much better than expected monthly jobs report to bring buyers into the market Friday. Stocks finished +0.5% to close out another volatile week of trading. Interest rates surged on the jobs report with the 10-year yield quickly approaching the 2% yield it held pre-pandemic.
Shaking off a serious mid-week selloff and a sharp rise in interest rates, stocks managed to finish higher on the week with the S&P 500 up +1.53%. The Nasdaq 100 (QQQ) rose +1.77% but failed to retake its 200-day moving average. Smallcap stocks recovered +1.60% though the group remains in a clear downtrend since its failed November breakout effort.
Warm wishes and until next week.