Day Traders Diary

1/20/22

The major averages reversed course, falling one percent after being up a percent earlier in the day as Wall Street continues to struggle this year in a rising interest rate environment. The Nasdaq Composite gave back its 2.1% gain and fell 1.2% on Thursday or 186 points. The Nasdaq is down more than 10% from highs set in November. The Dow Jones Industrial Average fell 313 points on Thursday, after being up more than 400 earlier in the day. The S&P 500 fell 50 points or 1.1% following its earlier gain of 1.53%. The S&P 500 closed below 4,500 for the first time since October 2021.

Bespoke Investment Group noted the prominence of harsh investor selling in the final hours of trading this year in a note to clients on Thursday.

Peloton tanked 20% on news it is temporarily halting production of its connected fitness products as consumer demand wanes, according to internal documents obtained by CNBC.

Technology stocks, like Zoom Video and Tesla, led markets higher for most of the day on Thursday. However, many lost steam towards the end of the session. Netflix dipped before its quarterly earnings slated for after the bell.

Stocks moved lower as government bond yields remained elevated, part of a market repricing as the Federal Reserve gets set to tighten monetary policy. The central bank meets next week, with markets indicating just a slight chance of action on interest rates. However, traders have fully priced in the first of what is expected to be four 0.25 percentage point hikes through 2022.

The two-year Treasury, which is most closely tied to Fed rate policy, most recently yielded about 1.04%, while the benchmark 10-year note was at 1.84%.

Several earnings reports moved stocks on Thursday. Dow component Travelers posted beats on the top and bottom lines while American Airlines also beat estimates but lowered guidance. Travelers rose 4%.

United Airlines shares fell 1% after the company reported its quarterly results and warned that omicron has dented bookings and will delay its pandemic recovery.

Unemployment data on Thursday signaled the surge in omicron could be hurting the recovery.

Jobless claims for the week ended Jan. 15 totaled 286,000 for the week, their highest level since October. The read was well above the Dow Jones estimate of 225,000 and a substantial gain from the previous week's 231,000.

On Wednesday, the Dow fell for a fourth straight day, dropping more than 300 points as Treasury yields built on their early 2022 gains. The S&P 500 also fell 0.9%. The Nasdaq Composite closed down by 1.15%.

Brad McMillan, chief investment officer at Commonwealth Financial Network, acknowledged that the turbulence could last for some time but said investors shouldn't panic about interest rate increases and that they're normal as the economy returns to normal.

For the week, the Dow is down about 1.2%. The S&P 500 has lost 1.4% since Monday. The Nasdaq is the biggest loser, down 1.8% this week.