Day Traders Diary

5/3/22

The major averages gyrated around the unchanged level, finishing in the green as investors looked forward to a pivotal Federal Reserve meeting tomorrow. The S&P 500 rose 23 points or 0.5%. The Dow Jones Industrial Average gained 105 points, or 0.32%, while the Nasdaq Composite added 23 points or 0.19%.

Tuesday's action followed a late rally from the previous session, which saw all three major averages erase sizable losses to close higher for the day.

Those moves come ahead of a widely anticipated Federal Reserve decision on Wednesday.

Wall Street is largely expecting the central bank to raise rates by 50 basis points this week, while some investors believe expectations of aggressive monetary tightening from the central bank are already priced into markets.

Billionaire hedge fund manager Paul Tudor Jones said on CNBC's "Squawk Box" Tuesday that, with the Fed tightening and signs that the economy is slowing, capital preservation should be the main goal for investors.

The benchmark 10-year Treasury yield retreated after hitting a new milestone on Monday. The bond yield hit 3.01% during the previous session, its highest point since December 2018, but fell back below the 3% level on Tuesday.

Tuesday's gains were broad in the S&P 500, but led by the energy sector. Exxon Mobil and EOG Resources each rose more than 2%. Defensive sectors such as health care and utilities also outperformed, with Pfizer gained 2.8% after reporting a stronger-than-expected first quarter.

Financials were another bright spot, with JPMorgan and Morgan Stanley rising more than 2%.

Stocks are coming off a brutal stretch of weeks. April was the worst month since March 2020 for the Dow and S&P 500. It was the worst month for the Nasdaq since 2008.

The S&P 500 is trading in correction territory, down about 13% from its record highs, but the size and length of this drawdown is in line with historical corrections, according to LPL Financial.

The expected rate hike comes as there are growing concerns about the global economy, due in part to China's lockdowns and the war in Europe.

Corporate earnings reports were spurring individual stock moves on Tuesday.

Chegg's stock price tumbled nearly 30% after the textbook company issued weak guidance for the full year despite exceeding earnings expectations. Expedia and Hilton tumbled 13% and 4%, respectively, after their quarterly reports.

On the positive side, shares of Clorox rose more than 4% after the company's fiscal third quarter results topped expectations.

There were some positive signs for the economy on the data front. Factory orders for March rose 2.2%, better than expected. Job openings came in at 11.5 million, an all-time high.

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