Market rerun

05/16/22
  • Stock skid extends as CPI and PPI remain hot
  • Oil swings higher, but energy sector slumps
  • This week: Retail earnings, retail sales, housing numbers

Considering how it started, last week could have been much worse.

Traders and investors are coming off another rollercoaster week as the S&P 500 (SPX) fell 3.2% last Monday, slid to its lowest point since March 2021 as the latest inflation data hit the Street, then pared its losses on Friday with a 2.4% rally—its fifth-biggest up day of the year:

Chart 1: S&P 500 (SPX), 3/8/22–5/13/22. S&P 500 (SPX) price chart. Friday rally trims week’s loss.

Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)


The headline: Volatile market extends slump amid stubborn inflation.

The fine print: The details of last week’s inflation numbers didn’t appear to be as important as the overall picture they painted. The Consumer Price Index (CPI) and Producer Price Index (PPI) both cooled slightly from a month ago, but remained near their four-decade highs.

The number: 6, the SPX’s current weekly losing streak. As noted here last Monday, after hitting a six-week skid, the index closed higher the next week seven times out of 10.

The scorecard: The Dow Jones Industrial Average (DJIA) has now been the strongest or second-strongest US index for six weeks in a row:

US stock index performance table for week ending 5/13/22. S&P 500 (SPX), Nasdaq 100 (NDX), Russell 2000 (RUT), Dow Jones Industrial Average (DJIA).

Source (data): Power E*TRADE. (For illustrative purposes. Not a recommendation.)


Sector roundup: The strongest S&P 500 sectors last week were consumer staples (+0.3%), communication services (-0.2%), and health care (-1%). The weakest sectors were real estate (-3.9%), financials (-3.6%), and information technology (-3.6%).

Highlight reel: Biohaven Pharmaceutical (BHVN) +68% to $140 on Tuesday, Squarespace (SQSP) +48% to $21.44 on Thursday. On the downside, Forge Global (FRGE) -28% to $23.59 on Monday, Upstart (UPST) -56% to $33.61 on Tuesday.

Futures action: After selling off sharply last Monday and Tuesday, June WTI crude oil (CLM2) jumped 11% the rest of the week, closing Friday at $110.49/barrel (see “Taking stock of oil”). In the face of high inflation and falling stock prices, June gold (GCM2) continued to slump, ending last week at a 13-week low of $1,808.20. Biggest up moves: July spring wheat (MWN2) +9.6%, July hard red wheat (KWN2) +9.5%. Biggest down moves: May ethereum (ETHK2) -23.2%, May bitcoin (BTCK2) -16.4%.

Coming this week

This week's numbers include:

Today: Empire State Manufacturing Index
Tuesday: Retail Sales, Industrial Production and Capacity Utilization, Business Inventories, NAHB Housing Market Index
Wednesday: Housing Starts and Building Permits
Thursday: Existing Home Sales, Leading Economic Indicators Index

Retail names highlight this week’s earnings calendar:

Today: Tower Semiconductor (TSEM), Ryanair (RYAAY), Wix.com (WIX), monday.com (MNDY), Take-Two Interactive Software (TTWO)
Tuesday: Home Depot (HD), Walmart (WMT), Keysight Technologies (KEYS)
Wednesday: Lowe's (LOW), Analog Devices (ADI), Target (TGT), TJX (TJX), Bath & Body Works (BBWI), Cisco (CSCO), Sociedad Quimica y Minera De Chile S.A. (SQM)
Thursday: Kohl's (KSS), BJ's Wholesale Club (BJ), Eagle Materials (EXP), Ross Stores (ROST), Applied Materials (AMAT), Palo Alto Networks (PANW)
Friday: Deere & Co. (DE), Foot Locker (FL)

Check the Active Trader Commentary each morning for an updated list of earnings announcements, IPOs, economic reports, and other market events.

2022 in a day

Last Friday may have been the marquee day for bulls, but Thursday’s price action laid the groundwork for the rebound—and it was also more representative of the market’s 2022 seesaw volatility.

A five-minute chart shows how the SPX flipped from negative to positive territory throughout the day, falling to its intraday low (-1.9%) with just 80 minutes left in the trading session before fighting back to end the day just shy of breakeven:

3. S&P 500 (SPX), 5/12/22 (5-min.). S&P 500 (SPX) price chart. Rollercoaster day in rollercoaster year.

Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)


That intraday low, by the way, was just a little more than 21 points above the SPX’s “official” bear-market threshold of 3,837.45—20% below January 3’s record close of 4,796.56.

Earlier this week Morgan Stanley Wealth Management advised investors to remain cautious in light of the volatility surrounding tightening monetary policy, geopolitical uncertainty, and dimming corporate outlooks.1

The price action itself offers another perspective. Looking at things from a weekly perspective, last week the SPX closed more than 15% below its weekly record close of 4,766.18. Since 1957, whenever the index has ended a week 15% or more below its previous weekly high close, it has fallen into a bear market all but two times.

Check back tomorrow for a more in-depth discussion about what that could imply for market’s path forward.

 

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1 MorganStanley.com. Making Sense of Tumultuous Markets. 5/10/22.

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