Big Movers In April 2022
Twitter (TWTR): Elon Musk plans to acquire the social-media company. Its board initially resisted his offer before accepting a purchase price of $54.20.
Netflix (NFLX): The streaming-video giant lost subscribers for the first time in more than a decade amid a saturated market and increasing competition. All of NFLX’s pandemic-fueled gains have evaporated. The stock is now the S&P 500’s worst performer on a year-to-date basis.
Ross Stores (ROST): The seller of low-priced apparel and home goods jumped along with other discount retailers like Walmart (WMT) and Dollar Tree (DLTR). The group has benefited as inflation increases.
Nvidia (NVDA): The former high-flier declined as tighter monetary policy drove growth stocks lower. It also faces worries about weaker semiconductor demand as PC sales decelerate. NVDA reports earnings on 25 May.
Sherwin Williams (SHW): The paint company reported better-than-expected earnings and revenue as management raises prices to offset inflation. Management said demand was strengthening in late March as the quarter ended.
PayPal (PYPL): The electronic-payments company hit a two-year low after attempting to rebound in March. PYPL also reported inline quarterly results but issued weak full-year guidance. The stock has lost more than two-thirds of its value since July.
Key Economic Events Last Month
The Fed Gets Even More Hawkish
Federal Reserve Chairman Jerome Powell hinted at a 50-basis point rate hike on 4 May, saying “it’s absolutely essential to restore price stability.” (21/4) Other policymakers including Lael Brainard, Mary Daly, James Bullard and Christopher Waller made similarly hawkish comments throughout the month.
Housing at a crossroads?
Housing starts reached a new 16-year high in March and building permits rose more than expected. While backward-looking data showed continued price gains, mortgage bankers forecast weaker demand because of higher interest rates. (19/4)
Economy unexpectedly shrank in Q1
Gross domestic product shrank 1.4% in the first quarter as consumption and inventory growth trailed estimates. The trade deficit also hurt GDP as the U.S. dollar surged and global economies struggled. Forecasters had expected expansion of 1.1%. (28/4) Revised numbers are due on 26 May.
Inflationary pressures squeeze wages
Consumer prices rose 8.5% in March, the fastest pace in over 40 years. (12/4). Later data from the Commerce Department showed real disposable income dropping 0.4% percent because of the inflationary pressures. (29/4)
Key Futures Contracts
| Product Name | Current Month | Expiration | Next Month | 1-Mon% |
|---|---|---|---|---|
| S&P 500 E-Mini (@ES) | ESM22(June) | 17 Jun 2022 | ESU22(Sep) | -8.9% |
| S&P 500 E-Mini Micro (@MES) | MESM22 (June) | 17 Jun 2022 | MESU22 (Sep) | -8.9% |
| Nasdaq-100 E-Mini (@NQ) | NQM22 (June) | 17 Jun 2022 | NQU22 (Sep) | -14% |
| Nasdaq-100 E-Mini Micro (@MNQ) | MNQM22 (June) | 17 Jun 2022 | MNQU22 (Sep) | -14% |
| Dow Jones E-Mini (@YM) | YMM22 (June) | 17 Jun 2022 | YMU22 (Sep) | -5% |
| Dow Jones E-Mini (@MYM) | MYMM22 (June) | 17 Jun 2022 | MYMU22 (Sep) | -5% |
Events to Watch This Month
| Date | Event | WhattoWatch |
|---|---|---|
| Wed, 4-May | Federal Reserve meeting and press conference | Markets already expect a 50-basis point hike. Will Jerome Powell get even more hawkish? |
| Fri, 6-May | Employment report | Non-farm payroll changes and revisions, unemployment, wage inflation |
| Wed, 11-May Wed, 12-May |
Inflation reports for April | Consumer prices are due 11 May, followed by producer prices on 12 May. |
| Week of 16-May | Retail news | April retail sales are due on 17 May. Major chains like Walmart (WMT), Home Depot (HD) and Target (TGT) also report during the week. |
| Thu, 18-May | Gross Domestic Product (2nd Estimate for Q1) | Further details on April’s disappointing growth numbers |
Sector Watch
Consumer staples were the only sector to climb in April as weakness in the broader market increased their appeal as safe havens.
Communication stocks had their worst month since launching as an independent sector in 2018. Weak results from Netflix and Alphabet exacerbated the move.
Energy stocks fell less than the broader market as geopolitical tensions keep oil and gas prices high.
Consumer Discretionary stocks fell as Amazon.com reported a surprise loss. Economic worries and supply-chain issues continued to weigh on automakers.
Noteworthy Calls & Predictions
Bank of America downgraded several transportation companies as spot-shipping rates fell. Analyst Ken Hoexter cited “deteriorating demand outlooks.” The Dow Jones Transportation Average proceeded to fall 9% in April, its biggest monthly drop since the coronavirus pandemic roiled markets in March 2020.
TransportsNew York Federal Reserve Poll: Consumers expect prices to rise 6.6% over the next year, the biggest increase since at least 2013. Survey respondents see rent, health care, food and fuel driving the inflationary pressures.
ConsumerMortgage Bankers Association: Loan originations may fall 35.5% from last year as higher rates suppress demand. Refinancing accounts for all the drop, while purchase-based volume is expected to inch up by 4%.
HousingAmerican Association of Individual Investors: Just 15.8% of respondents in a weekly poll termed themselves “bullish,” the lowest reading since September 1992. Two weeks later, bearishness reached the highest level since March 2009 as more investors abandoned a neutral outlook.
S&P 500Deutsche Bank: The U.S. faces risk of a “severe recession” as the Fed hikes interest rates. The economic researchers, led by Matthew Luzzetti, noted that the Ukraine crisis has worsened inflationary pressures. Tighter monetary policy “that meaningfully dents demand” could now be required, according to their note.
EconomyDisclosure
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