Although stocks closed the latest week on a positive note, that came only after they had flirted a hair’s breadth from technically entering a new bear market.
The US Market index wrapped up the week with a loss of another 2.4%, for a year-to-date drop of nearly 17%.
For a time Thursday it appeared stocks as measured by the S&P 500 were about to close 20% down from their all-time peak. That qualifies as an “official” bear market. At its lowest point Thursday, the S&P was 19.54% off of its Jan. 3 close. The US Market index reached an intraday low of 20.87% from a high.
But the market had rebounded solidly from those lows and traded higher Friday.
Why?
As veteran markets observers have been noting for months, we’re in for a great deal of continued volatility, and that doesn’t necessarily mean prices go down. Bear market rallies abound in down markets.
What will it take to see a meaningful market recovery?
Steve Sosnick, chief strategist at Interactive Brokers attributes it to two factors.
“This is the classic way that lasting bottoms are formed is that you need some sort of a shift in fiscal or monetary policy,” he says. “The Covid bottom came when the Fed brought out the heavy artillery. But right now they are in fact sucking liquidity from the market and that is not a positive.” The market is going to struggle,” Sosnick says.
The other, much harder to quantify, indicator is investor sentiment. And Sosnick says that even after the major declines of 2022, we have yet to see a true capitulation out of bullish investors. “There’s a part of me that thinks ‘you haven’t seen people that say just get me out,” he says. “To put in a more intermediate bottom, you’ve got to see sentiment get really washed out.”
The upcoming trading week will be light on significant economic data, with retail sales set to be released on Tuesday. Investors will be seeking out earnings from Walmart (WMT) and Home Depot (HD), and looking for signs of how inflation is impacting consumer spending.
There’s still proxy voting season, as well, with major measures up for consideration at several companies. In addition, there are two votes on fossil fuel financing policies at JPMorgan Chase’s (JPM) annual meeting Tuesday. Wendy’s (WEN) “vote no” campaign at its annual meeting Wednesday is aimed at board members over treatment of farm workers among suppliers. The company will face a shareholder vote on deforestation at Home Depot’s annual meeting Thursday.
What stocks are up?
Top performing stocks over the past week were TreeHouse Foods (THS), BioNTech (BNTX), Roblox (RBLX), Malibu Boats (MBUU), and Perrigo (PRGO).
Solid quarterly results boosted shares for several of the best performers last week. Treehouse Foods announced that the company’s sales were up in the most recent quarter although prices were higher.
Roblox also climbed after reporting an increase in daily active users that rose to 53.1 million from 49.5 in the quarter. Shares of BioNTech and Malibu Boats rose on impressive results.
What stocks are down?
The five weakest-performing companies were Coinbase (COIN), GoodRx (GDRX), RealReal (REAL), Pegasystems (PEGA) and Bed Bath & Beyond (BBBY).
News that wasn’t so nice, revealed alongside earnings results, shaved off tens of billions from many companies over the past week.
Shares in the cryptocurrency exchange Coinbase sank after sliding cryptocurrency trading volume left revenue down more than 50% from sequenced levels in the prior quarter. The firm also disclosed that cryptocurrencies that it holds on behalf of customers may be used to pay back debts in the event that it goes bankrupt, according to the Wall Street Journal.
GoodRX shares were down despite beating revenue and earnings estimates. Fears of future revenue growth were stoked by a spat between grocers and pharmacy benefit managers. Palantir (PLTR) also dropped on a weaker-than-expected outlook for the second quarter.
Shares of Twitter (TWTR) declined after CEO Elon Musk of Tesla (TSLA) suspended his buyout offer, saying he wanted to verify how much bot activity was on the site.
