Day Traders Diary

4/18/22

The major averages drifted lower closing in the red ahead of a big week of earnings, kicked off today by Bank of America reporting better-than-expected results. The Dow Jones Industrial Average slid 39 points, or 0.11%, to 34,411. The Nasdaq Composite lost 18 points or 0.14%, falling to 13,332. The S&P 500 close down 90 cents.

Stocks whipsawed in a rollercoaster session Monday after the 10-year Treasury yield reached its highest level since late 2018, trading at 2.884% at one point. The yield was at 1.71% to begin March, but has shot higher as the Federal Reserve pivoted to a more aggressive tightening stance. That change has weighed on stocks and triggered concerns about an impending recession.

Software companies fell and remained in the red. Datadog and Zoom Video each fell more than 4%. Okta and Workday fell 2.5% each. Tech stocks tend to fall as yields rise because growth-oriented companies are more likely to give investors higher returns in the distant future than in the near term.

Mega cap tech including Meta Platforms, Apple, Microsoft and Alphabet finished the day higher after wavering back and forth over the flat line throughout the trading session.

Meanwhile, investors were also preparing for a big week ahead of company earnings. Stovall noted defensive and inflation hedge stocks have seen an improvement in earnings expectations, while growth areas have seen reductions in first quarter estimates. Those reductions have been minor however, he added, saying it's too early to make major revisions.

Charles Schwab was the top decliner in the S&P, posting a 10% loss after the discount broker reported a quarterly miss on earnings and revenue estimates for the first quarter. Bank of New York Mellon shares fell more than 3% after the company reported lower profits for the first quarter.

By contrast, Bank of America's quarterly results, reported Monday, showed a 13% year-over-year drop in earnings per share, though the results were slightly higher than expected. The stock gained 4%, helping shares of fellow big banks JPMorgan Chase and Wells Fargo rise more than 2%.

Technology bellwethers are set to report quarterly earnings this week, with Netflix due on Tuesday and Tesla out on Wednesday. Snap reports Thursday. United Airlines, American Airlines and Alaska Air are also on the calendar, as are railroads CSX and Union Pacific. Several Dow blue-chip names also report earnings this week, including IBM, Procter and Gamble, Travelers, Dow Inc, Johnson and Johnson, American Express and Verizon.

Investors will be paying close attention to forward guidance, especially for comments on how companies are handling surging costs. March's consumer price index reading released last week showed an 8.5% increase from a year ago, the fastest annual gain since December 1981.