Day Traders Diary

7/14/22

The major averages recovered from a sharp selloff to start the day as JP Morgan and Morgan Stanley kicked off earnings season with disappointing results.

The Dow Jones Industrial Average shed 150 points, or 0.5%, after plummeting as much as 628 points, while the S&P 500 dropped 13 points or 0.3%. The Nasdaq Composite closed pretty much unchanged after falling more than 2% earlier in the session. Equities were on track for a week of losses, with the Dow and S&P down more than 2%.

Earnings results from major banks on Thursday offered further clues into the health of the U.S. economy as recession fears mount.

JPMorgan Chase shares sank 4.3% after the bank added to reserves for bad loans and halted its share buybacks, signaling a more cautious economic outlook. As profits dipped, CEO Jamie Dimon warned that the economy could take a hit from surging inflation, geopolitical tensions and dwindling consumer confidence "sometime down the road."

Continuing the trend, Morgan Stanley shares slumped 1.4% on the back of a sharp decline in investment banking revenue, while Goldman Sachs, which is set to report earnings Monday, fell 3.6%. Earnings from big banks continue on Friday with results from Wells Fargo and Citigroup.

The results from bank stocks raised further concerns that earnings estimates have perhaps risen too much in recent months. How much those numbers decline depends on the state of the economy and how hard a recession hits when and if it strikes, said Bob Doll, chief investment officer at Crossmark Global Investments.

Declines from JPMorgan, Goldman Sachs and Travelers led the Dow's losses on Thursday, while energy, materials and financial stocks were among the S&P 500′s worst performers. Mosaic shares tumbled more than 5%, while energy companies Halliburton and EOG Resources fell more than 4% each.

Big tech stocks were mixed on Thursday, with information technology marginally higher. Shares of Apple and Nvidia gained 1% as Meta Platforms, Salesforce, Tesla and Amazon each slipped more than 1%.

Thursday's market moves come after the consumer price index for June came in hot at 9.1% and opened the door for a big Federal Reserve rate increase later this month, with the fed funds futures market now pricing in a hike of as much as 100 basis points.

Comments from Federal Reserve Governor Christopher Waller on Thursday alleviated some of those fear as he said he's prepared to consider a bigger hike, but the market "is kind of getting ahead of itself."

Volatile oil prices also dropped on Thursday, with West Texas Intermediate crude hitting its lowest level since February.

Meanwhile, June's producer price index report, which measures prices paid to producers of goods and services, showed wholesale prices rise 11.3% versus a year ago last month as energy prices jumped and offered further insights into the pressure from inflation.

In other news, the inversion between the 2-year and 10-year rate on Thursday, which is a popular signal of a looming recession, hit its widest gap since 2000.