Stocks End Mix On Soft Earnings
3:54 pm Monday, August 08th, 2022
The stock market had a softer showing today but held up relatively well, all things considered. There was a batch of negative headlines this morning in addition to some hesitation ahead of Wednesday’s CPI report. Also, a notable absence of mega cap leadership drove the market lower. The main indices trended higher in the early going before losing steam around midmorning and giving back those gains. The market moved sideways from that point, closing just off intraday lows.
The big headline this morning was NVIDIA (NVDA) lowering Q2 revenue guidance and attributing that to a lower sell-in of Gaming products. The semiconductor stocks had a rough showing as a result with the PHLX Semiconductor Index (SOX) closing down 1.6% with nearly every component in the red. This also led the S&P 500 information technology sector (-0.9%) to close in last place on the day.
Other headlines in play at the open included:
Fed Governor Bowman (FOMC voter) said she sees another 75-basis point rate hike on the table for the September FOMC meeting.
The Senate passed the Inflation Reduction Act, which features provisions for a 1% excise tax on stock buybacks and a minimum 15% tax rate on corporate book income (although there is an offset for depreciated assets).
China unexpectedly announced the continuation of military drills around Taiwan.
With the market moving higher despite these headlines, the reversal in price action was largely attributed to buyer exhaustion and a nagging sense that the market got too complacent with its rebound effort.
The latter hit home in the performance of the so-called meme stocks and other heavily-shorted stocks, many of which saw huge percentage moves on no news. Bed Bath & Beyond (BBBY) and AMC Entertainment (AMC) are two examples which were up 63% and 24%, respectively, at their session highs. They both saw well-above average volume, too, despite no news catalysts.
When the speculative stuff takes off like that, it is often associated with an end-type move in a broader market rally effort. If nothing else, it forced participants to dial things back a bit, especially with the July Consumer Price Index set for release this coming Wednesday.
Another factor limiting index performance today was the trailing mega cap stocks. The Vanguard Mega Cap Growth ETF (MGK) closed down 0.4% versus a 0.3% gain in the Invesco S&P 500 Equal Weight ETF (RSP) and a 0.1% loss in the S&P 500. Meta Platforms (META) and Tesla (TSLA) were able to buck the trend and close with gains, leading their respective S&P 500 sectors, communication services (+0.4%) and consumer discretionary (+0.3%), to close ahead of the broader market.
Separately, WTI crude oil futures tipped back above the $90.00/bbl mark today, settling up 2.2% to $90.67/bbl. This boosted the energy sector (+0.5%), which closed near the top of the leaderboard. Natural gas futures settled 6.1% lower at $7.57/mmbtu.
