This year has so far proved volatile for Wall Street. Stocks have not done well in 2022.
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The S&P 500 started the last trading day of April in the red, putting it on track for its worst four-month start to a year in more than half a century.
In midday trading Friday, the S&P 500 and the Nasdaq Composite swooned 2.3% and 2.5%, respectively. Both indexes rallied more than 2.5% on Thursday. The Dow Jones Industrial Average was down nearly 600 points, or 1.7%, after climbing 614 points on Thursday.
The S&P 500 has fallen 12% so far this year and is on track for its worst January to April performance since World War II. The Nasdaq has been flirting with a bear market, down nearly 20% in 2022—its worst first four months on record, according to Dow Jones Market Data.
Earnings results from Amazon (ticker: AMZN) and Apple (AAPL) are weighing on the Nasdaq. The two company’s combined market capitalizations as of Thursday’s close was $4.14 trillion, about 20% of the Nasdaq’s aggregate market cap.
Amazon’s profit missed estimates by nearly one dollar a share because of higher labor and shipping costs in the quarter. The company also gave weak sales guidance for the current quarter. The stock was down 13%.
Apple’s profit and sales of $97.3 billion exceeded estimates, but the company said supply constraints in China resulting from the country’s Covid-related lockdown could reduce second-quarter sales by between $4 billion to $8 billion. The stock was down 2%.
While the Nasdaq was getting hit the hardest Friday, stocks across the board were lower. That isn’t a surprise. There have been dozens of 2% daily gains in the S&P 500 since 2018, and the next day only saw the index gain just a third of the time, according to Instinet.
The larger concern for stocks: The Federal Reserve is expected to aggressively lift interest rates to stave off high inflation, a move that will likely slow down economic growth, and reduce its bondholdings, which has lowered bond prices and lifted their yields. That makes future profits for companies worth less today, thus weighing on stock valuations.
Inflation—the impetus for all of this—has only worsened with the Russia-Ukraine war. That has prompted Western nations to block off Russian commodities from the global market, putting even more strain on consumers and corporate profit margins. Lockdowns in China are also blocking off global access to supplies coming out of the nation.
Indeed, the personal consumption expenditures index, the Fed’s preferred measure of inflation, gained 6.6% year over year in March, according to the Commerce Department on Friday. Investors had been hoping that inflation would have peaked, but that rate is higher than the 6.4% gain in prices seen for February.
“Investors continue to mull over high inflation, the war in Ukraine, and impacts of Covid restrictions in China,” wrote Chris Larkin, managing director of trading at ETrade.
There is good news, though. The core PCE result, which does not account for volatile—and recently soaring—energy and food prices, gained just 5.2% in March. That’s below the previous result of 5.4%. It means prices across the board are rising at a slower pace.
That could conceivably ease the pressure on the Fed to hike interest rates aggressively, which investors would welcome. The Fed will announce its interest-rate decision next week.
The bond markets appeared relatively calm. The 2-year Treasury yield, which reflects market expectations for the benchmark lending rate a couple of years from the present, was up a touch to 2.73% from around 2.7% before the PCE report came.
The mild rise in the yield isn’t much of a surprise. Yields have already reflected the Fed’s intention to lift rates. The 2-year Treasury yield, on pace to close Friday at a pandemic-era high, is up several times from a level just over 0.1% in January of 2021. The yield has now seen its largest 15-calendar month gain since the same stretch ended in January 1995, according to Dow Jones market data.
Here are six stocks on the move Friday:
Tesla (TSLA) was up 3.1% after CEO Elon Musk said via Twitter that he had no further plans to sell Tesla stock after Friday. The billionaire executive recently sold some $4 billion worth of the company’s shares, presumably to help fund his takeover of social-media group Twitter (TWTR).
Colgate-Palmolive (CL) stock dropped 5.4% after the company reported a profit of 74 cents a share, in line with estimates, on sales of $4.399 billion, above expectations for $4.398 billion.
Chevron (CVX) stock was down 2.4% after the company reported a profit of $3.36 a share, missing the FactSet consensus estimate of $3.41 a share, on sales of $54.4 billion, below expectations for $47.9 billion.
Exxon Mobil (XOM) stock was down 1.3% after the company reported a profit of $2.07 a share, missing estimates of $2.23 a share, on sales of $90.5 billion, below expectations for $92.7 billion.
AbbVie (ABBV) stock dropped 9% after the company reported a profit of $3.16 a share, beating estimates of $3.14 a share, on sales of $13.5 billion, below expectations for $13.6 billion.
Intel (INTC) stock fell 6.2% after the company reported a profit of 87 cents a share, beating estimates of 81 cents a share, on sales of $18.35 billion, above expectations for $18.31 billion.
Write to Jacob Sonenshine at jacob.sonenshine@barrons.com and Jack Denton at jack.denton@dowjones.com
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