Medicare Agent News: Fading Into The Close

Thursday, May 19, 2022

Fading Into The Close

By Nicholas Jasinski | Thursday, May 19

Lost Momentum. Stocks couldn’t hang on to an afternoon rally that had briefly pushed major indexes into positive territory.

The Dow Jones Industrial Average was down 1.5% at its morning lows, as it looked to be extending yesterday's painful 3.6% loss—its worst single-day decline since 2020. Then buyers swooped in, and pushed the index into the green around 3 p.m.

But the Dow couldn't hold those gains through the closing bell, finishing a bumpy trading day down 0.8%. The S&P 500 followed a similar pattern, to close down 0.6%. The Nasdaq Composite slipped 0.3%, giving up an afternoon gain of 1.3%. Yesterday the S&P 500 and Nasdaq dropped 4% and 4.7%, respectively.

Driving the latest selloff have been continuing concerns around inflation, including how higher costs will eat into corporate profit margins, and slowing economic growth. That topic remained front of mind today, after results from retailers Walmart and Target this week showed rising revenue but falling earnings.

In an overall gloomy backdrop, stock-market bulls have been able to point to the strength of the consumer and the support from rising corporate earnings this year. The results from Walmart and Target this week challenged that thesis.

“You can’t look at the news from Walmart and Target and at least consider if you’re missing something,” Credit Suisse’s Chief U.S. Equity Strategist Jonathan Golub told me today. “If the consumer has to make choices and spend less money, and if retailers aren’t able to profitably pass on higher expenses, then this marks a bigger problem.”

But Golub sees those issues as confined to the retailers, and not as a concern for the broader market. He notes that excluding banks, S&P 500 revenues were up 15% in the first quarter and earnings rose 20%. That means profit margins were expanding, not contracting.

And while consumers may be spending less on certain big-ticket physical goods like TVs, couches, and lawn mowers, pent-up demand for experiences is high. Lots of savings and a strong job market support further spending.

Golub has a 4900 target for the S&P 500 at the end of 2022, which would be an increase of about 25% from current levels.

It appears it will take further capitulation from investors for the market to bottom, however. Could we be nearing that turnaround?

“When the selling in equity markets spreads from speculative technology names to bricks-&-mortar retailers selling everyday goods, it’s not a completely unfair question,” wrote analysts at market data firm Quant Insight.

Even the best-performing areas of the market have gotten hammered of late, noted V22 technical analyst John Roque, pointing to big declines in the Consumer Staples Select Sector SPDR exchange-traded fund (XLP), which dropped 6.4% on Wednesday, and the Dow Jones Transportation Average, which slid 7.4%. They fell 1.8% and 1.9%, respectively, today.

Both had been outperforming the S&P 500 in 2022, but gave back big chunks of that outperformance over the past few days.

“It has often been said by market old-timers (we’re self-aware!) that ‘in a bear market they come for everyone,’ which means, unfortunately, that it was only a matter of time before the groups that had been holding up relatively better than the S&P…get hit, too,” Roque wrote.

Maybe that will bring the stock market one step closer to a bottom.