Not even a shortened trading week with markets closed Monday in observance of Martin Luther King Jr. Day could save stocks and cryptos from falling across the board. The S&P 500 fell more than 5% as 2022 has gotten off to a rotten start as investors pull out of stocks and cryptos with Bitcoin (BTC) plummeting more than 11% this week and Ethereum (ETH) dropping 17% over the past week. Recent disappointing economic data and earnings reports with lower-than-expected guidance and coronavirus cases soaring across the globe are partially to blame for the bearish turn.
Economic Data
It was a relatively light week for economic data as new housing data for December came in and unemployment claims rose suddenly.
Housing Starts and Building Permits for December surpassed economists' estimates with 1.7 million and 1.87 million reported respectively. Consensus estimates were around 1.65 million and 1.7 million for each. Both numbers were also an increase from November’s data of 1.68 million Housing Starts and 1.72 million Building Permits. However, Existing Home Sales fell from an annualized rate of 6.48 million to 6.18 million in December, analysts were expecting sales to mostly stay flat at 6.5 million.
Meanwhile, initial unemployment claims surprisingly jumped from 231,000 to 286,000, the highest reported since mid October last year. Economists were expecting claims to actually fall to 211,000. Additionally, continuing claims rose from 1.55 million to 1.64 million. Before this report, initial claims had recently settled in near the pre-pandemic range of around 200,000 weekly new claims. Continuing claims meanwhile are now around the average set before the pandemic struck. The sudden jump in initial claims is likely a signal on the negative effects the Omicron virus is having on the labor market.
Earnings Season
Earnings season has officially started and many large financial institutions reported quarterly performance this week with a primary focus around banks and airlines. Bank earnings were pretty mixed with Goldman Sachs (GS) shares falling as a result of missed estimates due to a 13% drop in profits from a year ago due partially to weak trading activity. Meanwhile, Truist (TFC) and PNC (PNC) shares stayed flat as each slightly surpassed estimates with PNC raising its guidance as well. However, both Truist and PNC along with Bank of America (BAC) saw shares fall towards the end of the week as markets overall continued to slide.
Meanwhile, both United Airlines (UAL) and American Airlines (AAL) saw their stock prices fall after earnings reports despite each airliner surpassing earnings and revenue estimates. American reported its second annual loss in a row due to the pandemic while United still has a capacity lower than it did in 2019 and warned that the Omicron variant will delay any travel recovery.
Netflix Crashes
Lastly, Netflix (NFLX) suffered its worst trading day in recent memory as its stock fell 21.79% Friday. The single-day loss was the worst suffered since July 25, 2012 when it dropped 25%, nearly ten years ago. The streaming service actually managed to report better-than-expected earnings and revenue for the past quarter but once again reported slowing subscriber growth. The company blamed increased competition for cutting into its growth as more and more streaming platforms rise with their own first-party content.
All in all, the S&P 500 fell 5.68%, the Dow Jones Industrial Average dropped 4.58%, and the NASDAQ lost 7.52%.
