Day Traders Diary

5/19/22

The major averages tried to rebound into the green numerous times today following the benchmark's worst day since 2020. The Dow Jones Industrial Average finished down 200 points or 0.6%. The Nasdaq Composite dropped 25 points or 0.23% while the S&P 500 index fell 20p points. The benchmark is teetering on bear market territory sitting about 18% below its record reached in January.

The S&P 500 and Dow are both down more than 2% for the week, driven in part by back-to-back quarterly reports from Target and Walmart that showed higher fuel costs and restrained consumer demand hurting results amid the hottest inflation in decades. Even after a 24% drop on Wednesday, Target shares were lower again Thursday by 4%.

Cisco was the latest major company to plunge on results with the tech bellwether down 14% on Thursday. Cisco said after the bell Wednesday that quarterly revenue fell short of analysts expectations and it warned revenue would disappoint in the current quarter.

On the other hand, a rebound in some tech stocks boosted the S&P 500 and the Nasdaq Composite at various points during Thursday trading. Shares of Synopsys gained 12% in Thursday trading after the software company posted an earnings beat. Shares of cloud company Datadog jumped 12%.

Nvidia, Amazon and Tesla also traded into the green Thursday.

Stocks have been under pressure all year with investors first pivoting away from highly-valued tech stocks with little profits. But the sell-off has since spread to more sectors of the economy, including banks and retail, as growing fears of a recession spooked investors.

A number of notable stocks in the S&P 500 hit new 52-week lows on Thursday. Target shares are trading at lows not seen since November 2020. Walmart shares are trading at their lowest point since July 2020. Shares of Bank of America and Charles Schwab dropped to their worst level since February 2021. Intel shares have fallen to lows not seen since October 2017.

Several Wall Street strategists issued some dire forecasts for stocks should the Fed's rate increases tip the economy into a recession. GDP in the first quarter decreased at a 1.4% rate so some slowing is already being seen.

Deutsche Bank cut its official target for the S&P 500 overnight, but said a recession would bring even bigger losses.

During a Wall Street Journal conference earlier this week, Federal Reserve Chair Jerome Powell reiterated his comments that "there won't be any hesitation" to bring down inflation.

Meanwhile, U.S. weekly jobless claims rose to 218,000 for the week ending May 14, the Labor Department said Thursday, the latest hint that economic growth is slowing.