Recession fears grew last week following weak earnings reports from major retailers, sending stocks lower.
The Standard & Poor’s 500 lost 3.05%, while the Dow Jones Industrial Average fell 2.90%. The Nasdaq Composite index dropped 3.82% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, gained 0.84%.1,2,3
Stock prices remained in a downtrend, capped by a sell-off on Wednesday following a succession of disappointing earnings reports from several major retailers. Despite solid April retail sales and industrial production data, weak economic numbers from China and shrinking profit margins at U.S. retailers fanned recession fears throughout the week.
Rising yields, which have been an overhang to the markets in recent weeks, turned lower as investors appeared to move cash to bonds from stocks. But lower yields did not help stock prices, which closed out the week with a volatile trading session.
Cloudy Picture with Retailers
Investors received a mixed message from the retail sector. April’s retail sales increased 0.9% from March, signifying that consumer spending remained strong. But it was difficult to determine from the retail sales report whether the increase was a function of higher retail prices or a resilient consumer.4
It was also a big week for earnings reports from some of the nation’s largest retailers. Results were disappointing as retailers struggled with supply chain issues, higher costs, and misaligned product mix. Some retailers indicated a drop in the number of transactions, suggesting that shoppers reduce purchases due to higher prices on essential items.
The last time we saw the S&P at 3,901 for any part of the day was March 25, 2021, so we have given back the last 14 months of gains.
By comparison, in 2020 the market bottomed on March 23rd with a low that day of 2,191.86, and the last time we had seen that was December 2, 2016. 39.5 months of gains had been temporarily erased.
During the financial crisis of 2008-09 the S&P 500 revisited lows that had not been seen in over 12 years, 5 months!
Stick to your plan. We are getting close to a major opportunity to buy stocks on sale.
This Week: Key Economic Data
Tuesday: Purchasing Managers’ Index (PMI) Composite Flash. New Home Sales.
Wednesday: Federal Open Market Committee (FOMC) Minutes. Durable Goods Orders.
Thursday: Gross Domestic Product (GDP). Jobless Claims.
Friday: Consumer Sentiment.
Source: Econoday, May 20, 2022
This Week: Companies Reporting Earnings
Monday: Zoom Video Communications (ZM).
Tuesday: Best Buy Co., Inc. (BBY), AutoZone, Inc. (AZO), Intuit, Inc. (INTU).
Wednesday: Nvidia Corporation (NVDA), Snowflake, Inc. (SNOW).
Thursday: Costco Wholesale Corporation (COST), Marvell Technology, Inc. (MRVL), Workday, Inc. (WDAY), Dollar General Corporation (DG), Dell Technologies, Inc. (DELL), VMware, Inc. (VMW).
Source: Zacks, May 20, 2022
"It takes a very long time to become young."
– Pablo Picasso
Don't Forget to Check Your Withholding
When was the last time you checked your tax withholding? Having the correct amount of tax withheld from your wages is an essential part of properly managing your taxes. The amount you withhold depends on your income, the number of children you claim on your return, and more.
The IRS has a helpful tool on their site called their Tax Withholding Estimator that can help you know if you have too much or too little tax withheld from your wages. Before using the tool, make sure you have all your paperwork handy, including your W2, 1099, 1095-A, and 1099-NEC, and any other forms you need to determine how much of your income is taxable.
* This information is not intended to be a substitute for specific, individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.
Tip adapted from IRS.gov5
What is Foam Rolling?
Exercise is super important for our overall health, but so is recovery. Foam rollers are a popular recovery tool because they can help release tension in tight, tired muscles.
Foam rollers are large cylinders made from high-density foam. They come in different sizes and firmness levels and can be used to massage both large and smaller muscle groups. Depending on your needs, you can use the foam roller before or after a workout.
You can do countless foam rolling exercises for sore muscles, including rolling out your hamstrings, quads, upper back, lower back, IT band, triceps, forearm, and more.
Tip adapted from WebMD6
Two trains are crossing America from coast to coast, traveling over 3,000 miles of track. The Gentle Zephyr is going west at 70mph; the Western Wind is headed east at 80mph. So which train will be closer to the east coast when they roll by each other in Kansas?
Last week’s riddle: Name two words in the English language that have the letter I twice in the middle of the word. Riddle answer: Skiing, taxiing.
Lighthouse of Westerhever, Westerhever, Schleswig-Holstein, Germany
Footnotes and Sources
2. The Wall Street Journal, May 20, 2022
3. The Wall Street Journal, May 20, 2022
4. The Wall Street Journal, May 17, 2022
5. IRS.gov, January 20, 2021
6. webmd.com, August 17, 2021
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Weekly Market Insights: Recession Concerns Rising
May 23, 2022