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Weekly Updates

Stocks See Broad Based Declines as Investors Digest Earnings, Inflation, and Omicron

Weekly Update – January 21, 2022

  • The S&P 500 index fell 5.7% last week with the consumer discretionary, communication services and technology sectors leading a broad slide as Q4 earnings reports came in mixed and added to investors’ concerns about the impacts of the pandemic, inflation and supply-chain issues.
  • The market benchmark ended the week at 4,397.94, down from last week’s closing level of 4,662.85. The week, which had only four trading days due to the market being closed Monday for the Martin Luther King Jr. Day holiday, is the S&P 500’s third consecutive week in the red. The index is now down 7.7% for the year to date following a 27% jump in 2021.
  • The decline for 2022 has come amid increasing concerns about inflation, supply chain issues and the COVID-19 pandemic.
  • Last week marked the first full week of US companies’ Q4 earnings results being released, and the reports only added to investors’ worries as many companies confirmed their concerns.
  • Every sector fell last week, with the largest percentage drops logged by consumer discretionary, down 8.5%; communication services, down 7%; technology, down 6.9%; and financials, down 6.4%. Among the other sectors with declines of 3% or more, materials lost 5.4%, industrials fell 4.4%, health care shed 3.4% and energy slipped 3.1%.
  • The decliners in the consumer discretionary sector included Ford Motor (F), whose shares tumbled 18% on the week as a National Highway Traffic Safety Administration report said the automaker is recalling nearly 200,000 older-model cars for an issue with their brake pedal bumper. The issue affects certain 2014 and 2015 Fusion and MKZ vehicles as well as some 2015 Mustang vehicles. Jefferies downgraded its investment rating on Ford’s stock to hold from buy.
  • In communication services, shares of Netflix (NFLX) shares fell 22% in Friday’s session alone, which put the stock down 24% for the week, as the entertainment services company released weaker-than-expected guidance for Q1 earnings per share, revenue and subscription growth. Disappointment over the guidance led to a flurry of investment rating downgrades and price target cuts by analysts.
  • In the technology sector, shares of NXP Semiconductors (NXPI) shed 11% last week as Piper Sandler downgraded its investment rating on the semiconductor maker ahead of the company’s Q4 report due at the end of the month. The firm also lowered its price target on NXP’s stock to $210 from $235.
  • In the financial sector, Goldman Sachs (GS) shares slid 9.7% last week as the investment bank reported Q4 earnings per share below analysts’ mean estimate amid higher operating expenses and lower revenue in its global markets business. Chief Executive David Solomon said on a conference call with analysts that there is still a “fair amount of uncertainty” as COVID-19 cases, driven by the omicron variant, rise.
  • Next week’s earnings slate is expected to include many big names including 3M (MMM), Microsoft (MSFT), Johnson & Johnson (JNJ), Boeing (BA), AT&T (T), Kimberly-Clark (KMB), Intel (INTC), Tesla (TSLA), Apple (AAPL), Chevron (CVX) and Caterpillar (CAT).
  • Data to be released next week will include January readings on consumer confidence and consumer sentiment as well as Markit’s January readings on the manufacturing and services sectors. Reports on December new and pending home sales as well as the December personal consumption expenditure price index are also expected.
  • In addition, there will be a two-day Federal Open Market Committee meeting next week, with a statement expected Wednesday afternoon.
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