Thursday’s bearish momentum spilled over generously into Friday’s trading, with nearly the entire market working in concert to produce a bad note at the end of the week.
Yesterday’s comments from Federal Reserve Chairman Jerome Powell weighed on sentiment again, saying we will see a 50 basis point hike in the fed funds rate after the central bank’s May meeting.
“When a Fed official suggests a 50 basis point hike, markets immediately start trying to price 75 basis point hikes,” said Jamie Cox, managing partner of Harris Financial Group. “It really is madness. Most investors would be well served by ignoring the machinations of price madness and waiting to see what is really going on with rates.”
“The Fed is prepared to inflict real economic pain on the economy to meet its inflation targets,” adds Dean Smith, chief strategist at investment technology platform FolioBeyond.
John Butters, principal earnings analyst at FactSet, notes that the S&P 500 index is reporting single-digit earnings growth for the first time since the fourth quarter of 2020, in part thanks to difficult year-on-year comparisons. another, but also to macroeconomic headwinds.
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“[The Fed’s] The hawkish stance gives investors pause as many need to assess the impact on profit margins and equity multiples going forward,” says Brian Price, head of investment management for Commonwealth Financial Network. “We are still very early in the earnings season, but higher costs are already weighing on profit margins and there does not appear to be any material relief in sight.”
Friday’s earnings schedule did little to improve the market‘s earnings picture.
Difference (GPS, -18.0%) slumped after posting a quarterly adjusted loss of 2 cents a share from a profit of 67 cents a year earlier; it also hacked its sales estimates for the current quarter and announced that Old Navy CEO Nancy Green would step down. Verizon (VZ, -5.6%) beat earnings expectations but said full-year earnings would be at the lower end of its expected range, which is below analysts’ views.
The major indexes all bled profusely. the Dow Jones Industrial Average (-2.8% to 33,811) saw all of its 30 components end in the red. The same was true for 489 of the shares of the S&P500 (-2.8% to 4,271). The largest Nasdaq Compound ended down 2.6% at 12,839, including falls for all but four Nasdaq-100 components. (The Nasdaq-100 is made up of the 100 largest non-financial components of the Nasdaq Composite.)
“[The CBOE Volatility Index, or VIX] seems to express widespread fear that the US economy is slipping into a recession,” says Michael Oyster, chief investment officer at asset management firm Options Solutions. “Options investors are faced with the reality that the Fed may have to raise rates even more aggressively than was expected six months ago.”
Other news on the stock market today:
- Small cap Russell 2000 was not immune to Friday’s woes, falling 2.6% to 1,940.
- U.S. crude oil futures fell 1.7% to settle at $102.07 a barrel.
- Gold Futures Contracts fell 0.7% to end at $1,934.30 an ounce.
- Bitcoin fell back below $40,000, falling 4.1% to $39,499.01. (Bitcoin trades 24 hours a day; prices shown here are as of 4 p.m.
- Health HCA (HCA) fell 21.8% after the Tennessee-based hospital operator lowered its full-year guidance due to rising labor costs. For 2022, HCA now expects earnings per share of $16.40 to $17.60 – down from its previous earnings per share forecast of $18.40 to $19.20 per share – and to revenue of $59.5 billion to $61.5 billion, down $500 million from its previous forecast. The negative earnings reaction weighed on a number of healthcare stocks, including Universal health services (UHS, -14.0%), Health care principle (THC, -15.7%) and Community health systems (CYH, -17.9%).
- Kimberly Clark (KMB) was a rare splash of green in today’s market, with consumer staples stocks jumping 8.1% after earnings. In the first quarter, KMB reported adjusted earnings of $1.35 per share on revenue of $5.1 billion, more than analysts expected. Toilet paper maker Cottonelle also raised its revenue and organic sales growth forecast for the full year. Still, CFRA Research analyst Arun Sundaram maintained a sell rating on the stock. KMB is “positioned unfavorably against some of its more diversified peers to navigate this historic inflationary cycle,” the analyst wrote in a note.
Invest green on Earth Day
April 22 marks the 53rd anniversary of Earth Day, created to highlight the need to protect the environment. And now, perhaps more than ever, Wall Street is getting involved in these efforts through promoting investments with strong environmental, social and governance (ESG) policies.
Indeed, even this year’s Earth Day theme – “Investing in Our Planet” – reflects the growing involvement of business and the investment community in sustaining our green and blue space marble.
“While top-down governments have grappled with the commitments needed for climate change solutions, bottom-up innovation and private sector investment have accelerated the progress needed,” said Jason Hoody, Head of Investment Manager Research and Sustainable Investing. research for LPL Financial. “Sustainable investing has the potential to leave a dual legacy: there is the legacy of potential returns that every investor seeks, but there is also a legacy of stewardship by meeting current needs without overburdening the environment or people. future generations.”
This dual heritage is, of course, the goal: investors want to do well, but they also want to do well. That’s why ESG investors should strive to target opportunities that are both good stewards of the world and the community around them, as well as attractive investment targets.
To mark Earth Day 2022, we’ve looked at five ESG picks that we think fit the bill – each underlying company has made great strides in multiple environmental areas, and each stock has high-quality fundamentals.