Daily Market Notes: 5-19-2022

In a session that will go down in the history books for its awfulness, the U.S. equity market yesterday lost $1.5 trillion in a day where only 8 of the 500 stocks in the S&P went higher, as it just went to show that unless the current fundamentals change for the better, rallies such as the strong one that we saw on Wednesday and last Friday are just technical short covering snap-backs in an ongoing bear market that shows no signs of changing for the better yet.

After a lower start, things just kept on deteriorating and deteriorating as the day moved along and in early afternoon when the market looked like it was trying to stabilize with the S&P down by “only” 115 points, none other than Jeremy Granholm decided to compare the current situation with those of the awful bear markets of 2001 and 2008 and this is the last thing that the current situation needed to hear.

From there it was further sharply downhill all the way to the close with the final sickening result of a 1,164 Dow decline to 31,490 and the S&P taking a huge 165 point hit down to 3,923. The Nasdaq was the worst of all with a 566- point shellacking down to 11,418 and the Russell 2000 Index of small stocks got shaved for a 65- point loss to 1775.

It was the worst single day showing since June 2020 and put the downside totals for the S&P at more than 18%, on the cusp of a bear market while the Nasdaq has now fallen by 30%. What makes this worse is that in the case of the S&P itself, the number of stocks below the 20% decline level far exceeds this number, with many in both indices  off by as much as 80%. The Dow is now at its lowest level since March 2021.

Things got off to a bad start following Europe, which saw new vehicle sales drop for the 10th month in a row and U.K. inflation rose to its highest level ever. Then China did not help with the first signs of new Covid infections in the past five days.

And a negative housing starts report with a decline of 0.2% and a building permit decline, an indicator of future activity, fell by 3.2% to a five-month low, also set the negative attitude in motion as well.

In addition, Fed Chair Powell’s comments from Wednesday, which were interpreted as bullish at the time, were now considered bearish when he said that the central bank “would not hesitate to tighten policy beyond neutral in order to curb inflation.”

The real negative lalapalooza was another downside earnings disaster in TGT, which suffered its worst one-day decline since 1987 for a 25% hit. This followed the disaster from the day before as Dow component WMT suffered a similar fate and in both cases there were higher costs combined with falling sales, the worst possible combination.

This led to horrific declines in other lower priced retailers such as DLTR, COST, DLG and BBY.  On the other hand, TJX had the nerve to go higher after its better than expected report.

The Nasdaq was hurt by large declines in chip stocks and cloud stocks with OKTA, ZS, AMZN, TSLA and NFLX.

For whatever reason, bond yields fell a bit to 2.89% for the 10-year Note as it hovers just below the 3% level for the longest time now and if anything positive came out of yesterday’s disaster it was that crude oil prices declined a bit down to $109.50 a barrel even as gasoline prices at the pump reach their highest level ever and this is another factor hurting consumer spending as obviously this will prevent people from being so free with their dollars on other things.

Today’s economic reports saw weekly jobless claims rise to a bit to 218,000 and the May Philadelphia Fed Manufacturing survey declined to 1.5 from 15 last month.

Earnings reports are not going to help with Dow component CSCO lower in addition to BBWI while SNPS is higher.

Donald M. Selkin

Chief Market Strategist

 

Don Selkin is the Chief Market Strategist at Newbridge Securities Corporation, member FINRA/SIPC and provides the Fair Value analysis for CNBC each morning. The commentary provided in this Market Letter is intended to provide our current or potential customers with timely market analysis and should not be considered a research report. This Market Letter may contain, and is limited to: Discussions of broad based indices; Commentaries on economic, political or market conditions; Technical analysis concerning the demand and supply for a sector, index or industry based in trading volume and price; Statistical summaries of multiple companies’ financial data, including listings of current ratings; and, recommendations regarding increasing or decreasing holdings in particular industries or securities. This Market Letter does not make a financial or investment recommendation or otherwise promotes a product or service of the firm. This Market Letter contains only news, facts, and commentary on information previously reported from a news source believed to be accurate and reliable by the author. These news sources include the following: {Bloomberg Financial, Reuters, and Associated Press}. It is possible that at any given point in time, the author, Newbridge Securities, or one or more of its employees or registered individuals associated with Newbridge Securities, may hold a position, either long, or short, as well as options, bonds or other instruments in the companies mentioned in this report.