Choppy trading continued on Wall Street as investors balanced good news, bad news headlines.
On the economic front, weekly jobless claims edged up a seasonally adjusted 230,000 last week – more than economists were expecting – though the four-week moving average remained near a record low.
The Labor Department also said that December’s producer price index – which measures how much suppliers are charging businesses for goods – was up 9.7% annually and 0.2% sequentially. While the former was the highest annual increase since the year-over-year data were first tracked in 2010, the latter marked the slowest month-over-month rise since November 2020.
Investors also got their first look at the fourth-quarter earnings season, which kicks off in earnest tomorrow morning when several big banks report.
This morning, though, Delta Air Lines (DAL, +2.1%) reported a larger-than-anticipated adjusted profit for its fourth quarter and its highest quarterly revenue since the pandemic began. However, for the current quarter, CEO Ed Bastian warned the omicron variant of COVID-19 “is expected to temporarily delay the demand recovery” into February.
By the close, markets had erased earlier gains to end solidly in the red. The Nasdaq Composite suffered the worst, shedding 2.5% to 14,806. The S&P 500 Index lost 1.4% to 4,659 and the Dow Jones Industrial Average gave back 0.5% to 36,113.
Other news in the stock market today:
- The small-cap Russell 2000 dropped 0.8% to 2,159.
- A day after reporting low crude oil inventories, the Energy Information Administration said gasoline supplies had risen by 8 million barrels, much more than expected. That sent U.S. crude oil futures 0.6% lower to $82.12 per barrel.
- Gold futures snapped a four-day win streak, declining 0.3% to $1,821.40 per ounce.
- Bitcoin wasn’t immune to the selling, giving back 2.4% to $42,803.79. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
- Large-cap technology and tech-esque stocks were among the worst performers of the day. Among notable decliners were ServiceNow (NOW, -9.1%), Tesla (TSLA, -6.8%), Nvidia (NVDA, -5.1%), Microsoft (MSFT, -4.2%), Salesforce.com (CRM, -3.9%), Netflix (NFLX, -3.4%) and Broadcom (AVGO, -4.0%).
- KB Home (KBH, +16.5%) rocketed higher Thursday as Street-beating profits more than overshadowed a miss in revenues. KBH reported fourth-quarter sales growth of 40% year-over-year to $1.68 billion, which was slightly less than estimates for $1.71 billion. That said, profits of $1.91 per share easily topped expectations for $1.76 per share, thanks in large part to a 9% pop in average selling price, to $451,000. “We expect strong demand in 2022 as KBH’s pricing power is able to pass on higher costs to higher prices with limited supply,” says CFRA analyst Kenneth Leon, who reiterated his Buy rating on KBH shares and raised his price target to $59 per share from $49 previously.
Bumps Equal Opportunities for Investors
Now is the time for conviction. That’s according to Scott Wren, senior global market strategist at Wells Fargo Investment Institute.
As we enter the part of the economic cycle where the Federal Reserve is beginning to normalize its policy after years of providing support and concerns over growth begin to emerge, it’s understandable if investors feel unnerved.
“Investors need to go through a mental adjustment process and realize that the road ahead is likely to feature a few more bumps than the one traveled over the past 20 months,” he says. But bumps, Wren adds, also offer opportunities.
We’ve also highlighted numerous high-conviction picks from the analyst community; most recently, breaking down RBC Capital Markets’ top 30 global stock investments for 2022. Despite the numerous hurdles investors are facing in the new year, industry analysts are “generally confident” these picks can clear them. Check them out.