Recession worries rise.
Recession worries rise, once the S&P 500 index into the bear market, but the main stock index late strong pull up, the Dow and the S&P 500 index erased weekday losses, the latter temporarily escaped the bear market range.
As of the close, the Dow rose slightly by 8.8 points to 31,261.9 points, after once sinking more than 600 points during the day; the S&P 500 was almost flat at 3,901.4 points, the largest intraday pressure, the stock index fell 20.9% from its January intraday high, entering the bear market range for the first time in more than two years; the Nasdaq closed down 33.9 points or 0.3% at 11,354.6 points.
The last time U.S. stocks entered a “bear” was back in March 2020, when the epidemic hit Europe and the United States, and countries imposed blockades and suspended economic activities to control the spread of the virus. However, in that month, the Dow returned to the bull market in just 11 trading days, i.e., a rebound of more than 20% from the previous low.
Currently, U.S. stocks are suffering from multiple shocks, including high inflation, accelerating interest rates, rising recession risks and the uncertainty of the situation in Ukraine. Selling pressure has long spread from technology stocks to all sectors, year-to-date, energy stocks for the only sector to achieve gains.
This week, the latest earnings reports from major retailers have investors worried about weakening consumer purchasing power and the inability of companies to cope with inflation, which is at a 40-year high. Shares of retail giants Wal-Mart and Target fell sharply after disclosing their results, with both stocks posting their biggest one-day losses since Black Monday in 1987, with Wal-Mart down 19.5% for the week and Target down a cumulative 29.3%.
To sum up the week, the Dow accumulated a 2.9% decline, the eighth consecutive weekly closing decline, according to foreign media statistics, for the first time since 1923, i.e., a century; the S&P 500 and the Nasdaq fell 3.1% and 3.8%, respectively, both hit the weekly seven consecutive negative, the longest decline since 2001.
National Securities chief market strategist Hogan (Art Hogan) said the past seven weeks of market struggles, largely related to inflation, “what high inflation means for corporate profitability, the Fed will take more aggressive measures to fight inflation. While this issue is old hat, it will continue to be the number one headwind for the market.”
Bill Stone, chief investment officer at trust company Glenview Trust, wrote in a report that despite the many headwinds triggering the current sell-off, the immediate cause of the accelerating decline in stocks is investor concern about the consumer market. “For the first time in the post-epidemic period, retailers are struggling with excess inventory, coupled with rising costs due to inflation, squeezing retailer earnings. There are signs that lower-end consumers are feeling the pinch from higher prices.”
Ross Stores, which missed revenue and earnings estimates, was another strong evidence of these concerns, with shares plunging 22.5% for the day. The company reported after-hours earnings Thursday for the year ended April, with revenue down 4 percent to $4.3 billion and net income down 29 percent to $340 million. The company's CEO, Barbara Rentler, said that the external environment is very challenging, the situation in Ukraine to exacerbate inflationary pressures, suffering from rising logistics and labor costs, revenue is expected to continue to weaken in the quarter ending July, sales will be backed by 4% to 6%.
John Deere, the largest U.S. farm machinery maker and considered a global economic bellwether, closed down 14.1%. For the quarter ended May 1, the company reported earnings of $6.81 per share, better than market expectations of $6.71, up 20 percent from a year earlier, on revenue of $12.03 billion, less than the expected value of $13.2 billion. The company said that despite higher costs for seeds and fertilizers, crop prices continued to be high, boosting farmers' interest in buying tractors, harvesters and other equipment. Therefore, the company raised its full-year earnings guidance, with a full-year net profit range of $7 to $7.4 billion. However, the company's management also noted that supply chain issues were disrupting production and delivery, and was confident that the situation would improve in the second half of the year.
Leave a Reply