Stocks stumble into May

05/02/22
  • Nasdaq in bear market as stocks close book on bearish April
  • GDP surprises to downside, big tech earnings come up short
  • This week: FOMC meeting, jobs report, 1,500-plus earnings

The cruelest month, indeed.

Last week was, perhaps, a fitting conclusion to the worst month for US stocks since March 2020, with a volatile market swinging to new correction lows amid mixed earnings and economic data.

After hitting a six-week low on Wednesday, the S&P 500 (SPX) erased the week’s losses with a 2.5% rally on Thursday—despite a disappointing GDP release—but Friday’s -3.6% slide locked in an 8.8% loss for the month:

Chart 1: S&P 500 (SPX), 2/15/22–4/29/22. S&P 500 (SPX) price chart. Down week, down month.

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


The headline: Rocky April ends with rocky week.

The fine print: Earnings continued to be a mixed bag, punctuated with high-profile disappointments. After Netflix’s (NFLX) big miss and sell-off a week earlier, Alphabet (GOOG) and Amazon (AMZN) came up short last week. Meta (FB) was a notable exception, jumping more than 17% after reporting a better-than-expected Q1 profit.

The number: -1.4%, the initial estimate of Q1 GDP. Analysts had expected a 1.1% increase.

The move: The Nasdaq 100 (NDX) fell 3.9% last Tuesday, rallied 3.5% on Thursday, then tumbled 4.5% on Friday.

The scorecard: The Dow Jones Industrial Average (DJIA) was the most resilient US stock gauge last week, while the Nasdaq 100 (NDX) slipped back into a bear market (down more than 20% from its November high) after suffering its biggest monthly loss (-13.4%) since October 2008:

US stock index performance table for week ending 4/29/22. 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 materials (-0.9%), energy (-1.3%), and information technology (-1.4%). The weakest sectors were consumer discretionary (-8%), real estate (-5.5%), and financials (-4.8%).

Highlight reel: Nkarta (NKTX) +141% to $18.72 on Monday, RCM Technologies (RCMT) +45% to $17.03 on Thursday. On the downside, Protagonist Therapeutics (PTGX) -50% to $9.41 on Tuesday, Teladoc (TDOC) -40% to $33.51 on Thursday.

Futures action: June WTI crude oil (CLM2) continued to zigzag, swinging last week to an eight-day intraday high of $107.99/barrel on Friday before closing at $104.69. June gold (GCM2) fell to a 10-week low of $1870.90/ounce last Thursday and ended the week a $1,911.70. Biggest up moves: May VIX (VXK2) +13.4%, June Russian ruble (R6M2) +10.1%. Biggest down moves: June hogs (HEM2) -10.4%, June pork cutout (PRKM2) -9.6%.

Coming this week

A key week of economic data includes the Fed’s latest interest rate announcement and the monthly jobs report:

Today: S&P Global Manufacturing PMI, ISM Manufacturing Index, Construction Spending
Tuesday: Job Opening and Labor Turnover Survey (JOLTS) , Factory Orders, Vehicle Sales
Wednesday: ADP Employment Change, International trade balance, S&P Global Services PMI, ISM Services Index, Fed interest rate announcement
Thursday: Productivity and Labor Costs
Friday: Employment Report, Consumer Credit

The busiest week of earnings season so far has more than 1,500 companies reporting their numbers, including several semiconductor names. Some highlights:

Today: Rambus (RMBS), ON Semiconductor (ON), Cardlytics (CDLX), Q2 Holdings (QTWO), NXP Semiconductor (NXPI), Arista Networks (ANET), Mosaic (MOS), Intrepid Potash (IPI), SolarEdge Technologies (SEDG), Clorox (CLX)
Tuesday: Estee Lauder (EL), Lattice Semiconductor (LSCC), Rockwell Automation (ROK), Pfizer (PFE), LGI Homes (LGIH), Airbnb (ABNB), Match Group (MTCH), Livent (LTHM), Lyft (LYFT), Advanced Micro Devices (AMD), Starbucks (SBUX), MicroStrategy (MSTR)
Wednesday: Uber (UBER), Moderna (MRNA), Royal Gold (RGLD), Vulcan Materials (VMC), Bio-Techne (TECH), Qorvo (QRVO), Twilio (TWLO), Albemarle (ALB), iRobot (IRBT), SunRun (RUN), Etsy (ETSY)
Thursday: EPAM Systems (EPAM), Lucid Group (LCID), Anheuser-Busch InBev (BUD), Penn National Gaming (PENN), Kellogg (K), Shopify (SHOP), ConocoPhillips (COP), Block (SQ), Zillow (ZG), Dropbox (DBX)
Friday: DraftKings (DKNG), Cigna (CI) 

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

The correction, so far

On Friday, the SPX closed 13.9% below its January 3 record close of 4,796.56—a new low in its current correction. That makes it—so far—notably smaller than the ones in February-March 2020 (-34%) and October-December 2018 (-19.8%), and not dramatically bigger than the -10.2% slide that unfolded in just nine trading days in February 2018.

But what this retreat has lacked in depth (so far), it has made up with duration. The SPX is about to enter its fifth month without making a new high and just fell to fresh lows. By comparison, five months after the 2020 correction began, the SPX had climbed nearly 47% off the move’s low, while five months after the start of the 2018 correction, the index was more than 18% above its low.

Of course, if the market continues to fall (Morgan Stanley Wealth Management recently highlighted the SPX’s potential “vulnerability”1), the SPX may rally off its eventual bottom as briskly as it has many times in the past. So far, though, that bullish momentum has yet to emerge.

 

Click here to log on to your account or learn more about E*TRADE's trading platforms, or follow the Company on Twitter, @ETRADE, for useful trading and investing insights.


1 MorganStanley.com. U.S. Stocks and the Oncoming Slowdown. 4/25/22.

What to read next...

04/29/22
Recent price action shows why traders should guard against reacting emotionally in volatile markets.

04/28/22
In the market, have April showers been followed by May flowers?

04/25/22
Market stumbles into last week of April amid inflation and interest rate concerns.

Looking to expand your financial knowledge?