Day Traders Diary

7/18/22

The major averages reversed course, losing steam on Monday, with the Dow Jones Industrial Average losing giving up a 350 point gain earlier in the session. The Dow Jones Industrial Average lost 216 points, or 0.7%, accelerating losses in the final hour of trading, erasing a 356 point jump at one point in the day. The S&P 500 fell 32 points or 0.84%, while the Nasdaq Composite declined 92 points or 0.89%.

The late-day drawdown follows a Bloomberg report that said Apple plans to slow hiring and spending on growth next year to deal with a possible downturn. Shares of Apple declined 2%.

Boockvar said Apple earnings will be important to the overall market in terms of how they manage currency, what's happening in the Chinese business and how they're going to react as consumers move more toward services than goods spending.

A strong earnings report from Goldman Sachs initially buoyed stocks, following mixed results last week from banks JPMorgan Chase and Morgan Stanley, though some on Wall Street warned investors to err on the side of caution during what's expected to be a choppy earnings season.

On Monday, Goldman Sachs posted earnings and revenue that easily beat expectations, even as CEO David Solomon said during an earnings call that inflation is "deeply entrenched" in the economy. Shares popped 5.6% at one point before easing.

Strong results from its fixed income operations helped Goldman Sachs offset a drop in investment banking revenue. Bond traders at the bank generated about $700 million more revenue than expected following increased trading in interest rates, commodities and currencies.

Bank of America reported quarterly revenue that beat analyst expectations, with shares ticking slightly higher. IBM will post results after the closing bell.

Other major companies set to report earnings this week include Johnson & Johnson, Netflix, Lockheed Martin, Tesla, United Airlines, Union Pacific and Verizon.

Despite the growing recession fears, S&P 500 companies are expected to post a 4.2% year-over-year increase in second-quarter profit, according to consensus analyst estimates gathered by FactSet. S&P 500 revenues are seen expanding 10.2% in the quarters, according to FactSet.

Profit expectations for the full year are still high with analysts estimating S&P 500 companies will lift 2022 earnings by 9.9%, data collected by FactSet show.

Energy stocks gained in the broader market index. Shares of Hess jumped 5%. Devon Energy gained 4% and Marathon Oil climbed nearly 4%.

Meanwhile, Boeing shares climbed nearly 1% on news that Delta Air Lines was buying 100 737 Max 10 planes. Shares of Delta jumped nearly 4%.

Investors assessed the likelihood that the Fed will be less aggressive than feared at its meeting later this month. A Wall Street Journal report Sunday said the central bank is on track to lift interest rates by 75 basis points, instead of the full percentage point increase forecast by some market participants.

Goldman Sachs chief economist Jan Hatzius also said in an overnight note that he expected the Fed to raise rates by three quarters of a point.

Still, recession fears have been prominent in recent weeks as Wall Street considered decades-high inflation, sharply rising interest rates and an inverted yield curve signal.