Markets Fall Again Ahead of July 4th Weekend

Last Updated: Thursday, July 7, 2022 3:50 PM | Neal Farmer

Another week, another loss for markets. The S&P 500 fell 2.20% during the week while cryptocurrencies as usual now did even worse. Bitcoin (BTC) has dropped 8.06% over the last seven days while Ethereum (ETH) said hold my beer and managed to fall 11.84%.

Growing fears of a recession and continued commitments to fighting inflation from central banks around the world have led to a bearish market and the worst first half of a year for markets in 52 years. This week was filled with a moderate amount of earnings reports and new economic data that was unable to move markets upwards despite some positive surprises.

Economic Data

The Personal Consumptions Expenditures Price Index for May highlighted economic data for the week with overall prices rising 0.6% following a 0.2% jump in April. Core prices (excluding food and energy) meanwhile increased a smaller 0.3%, matching its result from the previous month. Both numbers were slightly below the expected rise of 0.7% and 0.4% for overall and core prices respectively. The monthly change led to a year-over-year increase of 6.3% for overall prices and 4.7% for core prices, far above the targeted 2% rate but lower than the annualized rate from previous months.

Meanwhile, personal income met analysts' expectations for a 0.5% rise in May while personal spending increased just 0.2% compared to the projected 0.5% rise. Additionally, April’s results were revised down from 0.9% to 0.6% for spending while income was upwardly revised from 0.4% to 0.5%. A keynote was that real disposable personal income was down 3.3% year-over-year while real personal spending was up 2.1% annually as consumers deal with higher prices.

Outside of the PCE report, other data included: Durable Orders for May, Consumer Confidence in June, and unemployment claims for last week to just name a few. Orders rose 0.7%, easily surpassing estimates for a 0.1% increase and marking an improvement from the 0.4% rise in April. Consumer Confidence, meanwhile, didn’t meet the projected 101.0 reading and instead came in at 98.7, a significant drop from the 103.2 reading in May that was downwardly revised from an original mark of 106.4. Lastly, initial unemployment claims came in under the expected 234,000 claims with 231,000 claims, mostly flat from the 233,000 reported the previous week.

Earnings

Some larger names reported quarterly results this week including Nike (NKE), Bed Bath & Beyond (BBBY), Walgreens Boots Alliance (WBA), Constellation Brands (STZ), Micron (MU), General Mills (GIS), McCormick (MKC), and TD Synnex (SNX) among others. Results were mixed with most surpassing earnings projects for the most recent quarter but many issuing downwardly revised guidance going forward.

Bed Bath & Beyond was the worst offender with the stock down over 30% this week after massively missing on earnings projections (-$4.49 EPS versus expected -$1.39 EPS). The retailer ended up firing its CEO Mark Tritton as the company has struggled in the wake of the pandemic with multiple large earnings misses.

Bed Bath & Beyond wasn’t the only firm to miss estimates though as McCormick missed on both earnings and revenue projections while providing mixed guidance going forward which led to its stock price dropping nearly 6% over the week. Meanwhile, Nike and Micron Technologies both managed to surpass estimates but saw their shares fall after issuing downwardly revised guidance. Lastly, Walgreens saw its shares drop 7% after its earnings report despite an earnings and revenue beat as the company abandoned the sale of Boots after putting it up for sale back in January.

All in all, the S&P 500 fell 2.20%, the Dow Jones Industrial Average dropped 1.28%, and the NASDAQ lost 4.13%.

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