Wall Street Looks for Respite as Investors Place Inflation Wagers

The Dow is on track to snap an eight-week losing streak

Deputy Editor
May 27, 2022 at 1:16 PM
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The last full week of May saw some optimism injected into Wall Street, starting with the Dow Jones Industrial Average's (DJI) big triple-digit win on Monday, which was boosted by news that U.S. President Joe Biden may ease tariffs on Chinese imports. By Tuesday afternoon, the market looked like it might make a comeback from its recent selloff; and while the Dow turned things around in the final hours of trading, the S&P 500 Index (SPX) and Nasdaq Composite (IXIC) weren't so lucky thanks to a dire warning from tech concern Snap (SNAP).

At midday Wednesday, renewed strength in the retail space helped the S&P 500 and Nasdaq sport sizable gains, while the Dow hovered just under breakeven. By the session's close, the Dow joined the other benchmarks, nabbing its fourth-straight win  thanks to the Fed's latest interest rate update. Thursday saw buyout news and retail earnings boost sentiment, and the Dow recorded its fifth-straight jump after Wall Street placed bets on inflation's peak. At midday Friday, the major indexes are pacing for daily wins, and the Dow is on track to snap an eight-week losing streak thanks to upbeat inflation data.

Unpacking More Earnings Results

Earnings trickled in last week, giving investors some indication of inflation's impact. However, most notably, Snap's pre-earnings warning that it would miss top- and bottom-line expectations dragged the equity 41% lower and had major broad-market repercussions. Analysts, meanwhile, looked past Williams-Sonoma's (WSM) strong earnings, hitting the stock with a host of bear notes despite same-stores sales growth tripling forecasts. Elsewhere, Nordstrom (JWN) and Intuit (INTU) each reported a beat-and-raise, while Advance Auto Parts (AAP) hit a 12-month low after whiffing on earnings.


News From The Boardroom

There was a lot to report on in terms of mergers, acquisitions, and other comparable deals. Long-time shareholder of Wendy's, Trian Partners, is working towards a deal to "enhance shareholder value."  Semiconductor concern Broadcom (AVGO), meanwhile, is looking to spend around $60 billion on cloud computing company VMware (VMW). Video game maker Electronic Arts (EA) held talks with several big names concerning a buyer or merger deal. Elsewhere, multi-year defense contracts had options bulls excited about these three satellite stocks,  while Coinbase Global (COIN) prepared for its annual shareholders meeting, and Apple (AAPL) provided an update regarding its iPhone production plans. 

Stocks to Watch During the Holiday-Shortened Week

Markets are closed on Monday in observance of Memorial Day, but there's still plenty of inflation-related economic data on deck for investors to unpack. In addition, though earnings season is officially over, Chewy (CHWY), GameStop (GME), HP (HPQ), Salesforce.com (CRM), and Trip.com (TCOM) are a few notable names still slated to report. In the meantime, Schaeffer's Senior Market Strategist, CMT Matthew Timpane digs deeper into a historic S&P 500 weekly pattern, while Schaeffer's Senior Quantitative Analyst Rocky White breaks down 25 stocks to target during the holiday-shortened week.



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