Equity Indices Including S&P 500 Remain Vulnerable as Inflation Near 40-Year Highs
February 13 2022 - 5:01PM
Finscreener.org
Major equity indices continued to
move lower in the last week as inflation numbers touched 40-year
highs. The
S&P 500 Index
is now down almost 8% from all-time
highs, while the NASDAQ and Dow Jones are trading 14% and 5% below
record highs respectively.
Investors should expect stocks to
remain volatile in the next week too, due to rising tensions
between Ukraine and Russia as well as the threat of
multiple interest rate
hikes by the Federal
Reserve to combat inflation.
Bond yields also ended higher on
Thursday as the consumer price index or CPI surged by 7.5% year
over year in January 2022. Comparatively, Dow Jones expected
inflation of 7.2% in the last month, which was the highest since
February 1982. Even after accounting for gas prices and grocery
costs, the CPI rose by 6.9% compared to estimates of
5.9%.
In an interview with CNBC, the
chief investment officer at Bleakley Advisory Group, Peter Boockvar
explained, “I think the Fed is keeping everyone on edge, and this
is going to add to that edginess. So we had a three-week earnings
respite from the macro. We turned micro, and this week we were
reminded earnings season is pretty much over and all macro issues
matter again.”
Major S&P 500 earnings this week
The Federal Reserve will be
releasing the minutes from the previous meeting this Wednesday.
Investors will be waiting anxiously to see if the regulatory
authority will aggressively increase interest rates to combat
inflation.
Further, the producer price index
numbers will be out on Tuesday, giving investors another peek into,
you guessed it right, inflation. Given rising prices, consumer
spending might experience a decline, making retail sales data
releasing on Wednesday, all the more important.
While macro-economic data will
weigh heavily on the markets, major companies on the S&P 500
including Cisco (NASDAQ:
CSCO),
Nvidia (NASDAQ:
NVDA),
Walmart (NYSE: WMT), and Deere (NYSE:
DE) will be reporting earnings this week. The
earnings call will be followed closely as companies will be looking
to pass prices onto consumers in the upcoming quarters.
Splunk, Affirm, and Zillow among major
movers
Shares of SaaS
(software-as-a-service) company, Splunk
(NASDAQ: SPLK)
moved higher by 11% in after-hours trading on Friday after a report
from Wall Street Journal stated Cisco made an acquisition bid to buy the former for
more than $20 billion. Splunk’s sales in the last 12-months stood
at $2.5 billion and is forecast to report sales of $2.55 billion in
fiscal 2022 and $3 billion in fiscal 2023.
The company’s suite of products
has gained popularity in recent years for identifying security
threats. Cisco already leads the global enterprise security market
making Splunk an ideal acquisition which will also be its
largest-ever buyout.
Under Armor (NYSE:
UA) shares were down 12.5% on the back of supply
chain issues which impacted the company’s outlook. It also warned
that higher freight expenses will weigh on the bottom line going
forward.
Shares of household products
manufacturer Newell Brands (NASDAQ:
NWL) surged by 11% as it
beat Wall Street earnings and revenue estimates and provided an
upbeat earnings forecast. Its adjusted earnings for the most recent
quarter stood at $0.42 per share, compared to estimates of $0.10
per share.
Fintech company
Affirm (NASDAQ:
AFRM)lost over 20% in
market value after several analysts downgraded the stock on the
back of a tepid outlook and a massive earnings miss.
Shares of Zillow
Group (NASDAQ:
Z)
were up 12.6% after it reported better than expected losses for Q4
of 2021 and beat revenue forecasts as well.
GoDaddy (NYSE:
GDDY) shares were up
close to 9% after its beat earnings and revenue forecasts as well
as announced a share buyback program worth $3 billion. In Q4, its
adjusted earnings per share stood at $0.52 compared to estimates of
$0.41.
The market cap of online review
company Yelp (NYSE: YELP)
also moved higher by 4% after its adjusted earnings stood at $0.30
per share, compared to estimates of $0.14 per share. Yelp also beat
top-line estimates on the back of strong ad sales.
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