The stock market sell-off intensified today with the S&P, Nasdaq, and Dow Jones indexes trading lower. Following comments from Federal Reserve Chair Jerome Powell earlier this week and more robust GDP figures boosting the U.S. dollar, the 2022 stock market correction continued.
Following the lunch hour on Thursday, the S&P 500 ETF (NYSE:SPY) was back trading around $430, with the Nasdaq ETF (NASDAQ:QQQ) hovering near $341. Some of the biggest laggards were found in tech, including EV stocks like Tesla (NASDAQ:TSLA) and Rivian (NASDAQ:RIVN). Meanwhile, semiconductor stocks put in fresh January lows. VanEck’s Semiconductor ETF (NASDAQ:SMH) dipped to lows of $256 for the first time since October 2021.
U.S. GDP (gross domestic product) jumped in the final months of last year. Figures came in at a better-than-expected 6.9% annualized rate for the fourth quarter. Economists expected 5.5%. Heavy spending was seen in inventories, the second-highest portion of the GDP readout.
Unemployment filings also dipped lower for the first time in nearly a month. This came after recording a 3-month high in the prior reading. With fears of the latest virus variant weighing on employment expectations, this came as another welcome sign.
Even penny stocks and small-caps weren’t immune to the pressure. While there were plenty of penny stocks that surged on an individual basis, the broader segment of the market stumbled. A quick look at the Russell 2000 Small-Cap ETF (NYSE:IWM) will tell the story. Among some of the more popular ETFs, the IWM has dropped the most, now off of its recent high by more than 20%.
So what happened in the stock market today, and why did markets sell-off?
Lunchtime Sell-Off Leads To Choppy Afternoon
The lunchtime sessions kicked off the bulk of Thursday’s sell-off. With the Federal Reserve set to tighten financial conditions, it wasn’t anything related to a “new variant” or employment that weighed on markets. This move had directly correlated to economic uncertainty.
The FOMC confirmed this week that it would wrap asset purchases before the end of the quarter in March. This gave some fodder for speculation as to the first rate-hike to come soon. Hopes were high that the Fed would provide a bit more clarity on tackling inflation. Even in light of the discussion from Fed Chair Powell on Wednesday, the buzz around the stock market today has expectations for more than three hikes this year.
Why raise interest rates? These increases are planned for implementation to cut economic demand and reduce inflation. Essentially, higher rates could put a mark on economic growth as well.
We also saw earnings uncertainty hit the market. Despite a bullish post-market session for Tesla on Wednesday, shares of TSLA stock closed near its low of the day at $829. Putting this into perspective, this is roughly $13 shy of Tesla’s 200-day moving average and a technical level not tested since last August.
The Future Of Bitcoin: Uncertain
A report hit the newswires late Thursday afternoon from Barron’s regarding the Biden Administration and Bitcoin. According to the report, plans are for executive action to task federal agencies in regulating cryptocurrency assets as a matter of national security.
…Executive action to task federal agencies in regulating cryptocurrency assets as a matter of national security.
Organizations involved would include The State Department, Treasury Department, National Economic Council, and Council of Economic Advisors. According to Barron’s “person familiar with the White House’s plan,” the goal of this is to create policy.
“This is designed to look holistically at digital assets and develop a set of policies that give coherency to what the government is trying to do in this space,” the person said. “Because digital assets don’t stay in one country, it’s necessary to work with other countries on synchronization.”
SEC Says No ETF For You, Fidelity
The news comes as the Securities & Exchange Commission disapproved a proposal for another spot Bitcoin ETF. Fidelity submitted an option to bring a new ETF online, but the SEC raised concerns about potential fraud and manipulation impacting the spot market. A continued stance on “investor protection” has remained the overarching message from the Commission. Several Bitcoin and even NFT-related ETFs are already traded publicly right now.
“This order disapproves the proposed rule change. The Commission concludes that BZX has not met its burden under the Exchange Act and the Commission’s Rules of Practice to demonstrate that its proposal is consistent with the requirements of Exchange Act Section 6(b)(5), and in particular, the requirement that the rules of a national securities exchange be “designed to prevent fraudulent and manipulative acts and practices” and “to protect investors and the public interest.”
US Securities & Exchange Commission
Fidelity isn’t alone in its bitcoin misery, though. First Trust and SKybridge Capital were also shot down recently for similar concerns.
The Stock Market Today
Heading into the final trading day of the week and second-to-last of the first month of 2022, markets are struggling to gain footing. Some call this “the year of the active trader,” and that has been the case so far. Major indexes are in correction territory, some at technical bear market levels. Meanwhile, it’s the middle of earnings season, and in bearish market conditions, even strong results seem to have a softer impact.
As of today’s close, here’s where things stand for the SPY, QQQ, DIA & IWM (for small-cap traders):
| ETF | Recent High | Percentage Change (1/27 Close) |
|---|---|---|
| SPY | $479.98 (1/4/2022) | -10.15% (@$431.24) |
| QQQ | $408.71 (11/22/2021) | – 16.54% (@$341.1) |
| DIA | $369.95 (1/5/2022) | -7.56% (@$341.55) |
| IWM | $244.46 (11/8/2021) | -21.65% (@$191.52) |
Apple Earnings
However, post-market earnings helped prop up markets a bit. Apple’s (NASDAQ:AAPL) earnings calmed tech with a historic Q1 performance. Revenue for the quarter came in at $123.95 billion compared to $119.05 billion expected. Meanwhile, earnings per share of $2.10 smashed the $1.90 per share expected. CEO Tim Cook’s comments regarding supply chains may have helped bring some feeling of “a light at the end of the tunnel.”
Cook explained that Apple’s supply chain challenges were improving. Thanks to the massive quarter, Thursday, AAPL stock surged in after-hours trade. Considering it is one of the top holdings of both the SPY and Qs, it brought some much-needed bullishness back to the market.
Other earnings of note were mobile-first brokerage platform Robinhood (NASDAQ:HOOD), which completed fell apart after results came out. HOOD stock broke below $10 per share at one point before leveling out around $10.20 in after-hours trading. Analysts expected more from the company during the quarter. The company also discussed a weaker outlook than analysts expected for Q1.
US Steel (NYSE:X) also posted results, beating on revenue but missing on EPS. Regardless of the miss, traders took the substantial revenue and swing to profit as a bullish tone. Shares of X stock popped in late-aftermarket trade to highs of over $19 from a close of $18.59.
Visa (NYSE:V) also followed in the footsteps of X and AAPL stock, surging in post-market trade. The credit card company posted a beat on both EPS and revenue, with fiscal Q1 2022 payment volume up 20%.
Earnings Calendar For January
This is the thick of earnings season as January comes to a close and February begins. There are some notable results to be on the lookout for ahead of Valentine’s month. Here’s a list of some of the remaining earnings to watch for in January:
Notable Earnings Calendar January 28, 2022
Friday morning will see results from:
- Chevron (NYSE:CVX)
- Caterpillar (NYSE:CAT)
- Charter Communications (NASDAQ:CHTR)
- Colgate-Palmolive (NYSE:CL)
- Phillips 66 (NYSE:PSX)
- Dr. Reddy’s (NYSE:RDY)
and a slew of others.
Notable Earnings Calendar January 31, 2022
Monday’s earnings start with companies including:
- L3Harris Technologies (NYSE:LHX)
- Five Star Bancorp (NASDAQ:FSBC)
- Otis Worldwide (NYSE:OTIS)
among others.
As investors weigh risk/reward, daily trends have driven trader sentiment.
