Wall Street Selloff Sends S&P 500 Toward Bear Market

The Dow is on track for its eighth-straight weekly loss

Deputy Editor
May 20, 2022 at 2:24 PM
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The latter half of May got off to a shaky start, with the Dow Jones Industrial Average (DJI), S&P 500 Index (SPX), and Nasdaq Composite (IXIC), erasing most of Monday morning's gains and dragging the SPX toward bear market territory. However, the Dow managed to walk away from the session with a modest win. Tuesday afternoon, the major benchmarks were all substantially higher, as investors awaited Wednesday's inflation comments from Federal Reserve Chairman Jerome Powell. At the close, the Dow locked in its third-straight win, while the S&P 500 and Nasdaq both scored gains as well.

On Wednesday, several major retailers took their respective trips to the earnings confessional, and the results spiked Wall Street's concerns of the impact of inflation and high gas prices. In turn, the DJI and SPX each logged their worst session since June 2020. Thursday saw mixed results at midday, with the S&P 500 sporting modest gains to distance itself from bear market territory, while the Dow was off by more than 200 points. By the close, however, the SPX managed to move lower once more, and the Nasdaq gave back a triple-digit lead in the final hour of trading. At midday Friday, the major indexes are on track for daily losses, and the Dow is pacing for its eighth-straight weekly loss, while the S&P 500 and Nasdaq are also extend their weekly losing streak.

Retail Earnings Stoke Inflation Fears

Though earnings season is coming to a close, several major retailers released highly-anticipated reports last week, with investors looking for clues on the impact of inflation. To start things off, Walmart (WMT) slashed its full-year forecast, which put pressure on Target (TGT) ahead of its own earnings report. Things got worse for the latter's shares, which fell 24% after the company reported earnings that missed expectations by nearly $1. Blue-chip home improvement giant Lowe's (LOW) also saw its shares fall after earnings, thanks to a revenue miss and drop in same-store sales. Conversely, rival Home Depot (HD) enjoyed tailwinds after hiking its full-year sales and profit forecasts


Notable Analyst Adjustments

Analysts were busy last week, adjusting price targets and ratings alike while the broader market continued to see volatility. Netflix (NFLX), amid ongoing troubles with subscriber losses, was upgraded by Wedbush, with the analyst predicting a rebound could be right around the corner. Wedbush weighed in on another big tech name later in the week, slashing its price target on Tesla (TSLA) on worries of "modest delivery softness" in the latest quarter. And, amid the disruption in the retail sector, J.P. Morgan Securities slashed its price target on Kohl's (KSS). Ollie's Bargain Outlet (OLLI), meanwhile, earned a double upgrade, with one analyst noting the discount retailer's potential tailwinds stemming from bigger retail chains' over-ordering. Elsewhere, Take-Two Interactive (TTWO) was hit with a round of price-target cuts, after the company missed top- and bottom-line expectations for the fourth quarter.

Inflation Update on Tap for Next Week

During the last full week of May, investors will tune into a mid-week update from the U.S. Federal Reserve, while Alibaba (BABA), Big Lots (BIG), Costco (COST), Toll Brothers (TOL), and Zoom Video (ZM) will all step into the earnings confessional. In the meantime, Schaeffer's Senior V.P. of Research Todd Salamone notes a key trendline the S&P 500 is near, which pairs well with Schaeffer's Senior Quantitative Analyst Rocky White's advice on how to play the broader-market index's latest rut.



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