Day Traders Diary

5/16/22

The major averages finished mixed in choppy trading Monday as the broader market index struggled to recover from last week's losses and traders weighed the potential for a U.S. recession.

The major averages vacillated between highs and lows all day. The Dow Jones Industrial Average closed 26 points despite dropping as much as 0.8% earlier in the day. The S&P 500 dipped 15 points or 0.2%, after previously losing as much as 0.99%. The Nasdaq Composite dropped 143 points or 1.2%.

Those moves come after a rough week as concerns over slowing U.S. economic growth, higher rates from the Federal Reserve and soaring inflation have dented market sentiment. The Dow posted a seven-week losing streak Friday, its longest since 2001. The S&P 500 notched a six-week slide — its longest since 2011.

Treasury yields have spiked this year as the Fed tightens monetary policy to stave off decades-high inflation. The benchmark 10-year rate started the year at roughly 1.5%; it traded at around 2.84% on Monday and briefly eclipsed the 3% mark earlier this month.

In turn, the major averages have fallen well off their record highs. The Dow and S&P 500 are 12.3% and 16.3%, respectively, below all-time highs reached in January. The Nasdaq is squarely in bear market territory, down more than 27% from its November record.

To be sure, some analysts believe those declines may soon point to an attractive entry point for the broader market index, based on a long-term perspective.

Meanwhile, strategists at RBC Capital Markets said in a Monday note that the S&P 500 is at a crossroads as it struggles to find a bottom. If the broad market index holds at 3,850 – a figure close to the intraday record the S&P 500 nearly breached last week – strategists believe stocks are matching the late 2018 drawdown.

Energy led gains in the S&P 500, with the sector rallying more than 3%. Occidental Petroleum was the best-performing energy stock Monday, popping more than 6%. Marathon Oil, meanwhile, gained 4.2%. Those gains come U.S. oil prices popped 3% on bets that China would be able to recover from an economic slowdown caused by Covid lockdowns.

Other notable outperformers on Monday included health care stocks. Shares of Eli Lilly surged 4% after Mounjaro was approved by the Food and Drug Administration to treat Type 2 diabetes. The drug is also being investigated for potential use in the treatment of obesity and overweight. Pfizer's stock price jumped 1.4%, AbbVie's stock price was up 1.3%.

Elsewhere, shares of Spirit Airlines jumped 12% after JetBlue announced a tender offer to acquire the airline for $30 a share. Carvana's stock price rose 5% after the used car company issued expectations of significant core earnings in 2023, and outlined a plan to cut costs.