3 things to watch in the stock market next week
Russia’s seizure of a Ukrainian nuclear power plant could keep investors on edge but isn’t stopping the impending Fed rate hikes. The spring housing market kicks off and noteworthy earnings reports will be released.
After ending higher last week, stocks are back on the decline.
At the time of this writing Friday afternoon, the Nasdaq Composite is down 2.19% for the week, while the S&P 500 and Dow Jones Industrial Average (DJIA) are down 1.27% and 1.47%, respectively. The only two sectors in the green are energy and utilities.
Oil stocks have been leading the S&P 500 this year, as oil prices continue to soar. Crude oil prices have increased over $100 a barrel following Russia’s invasion of Ukraine.
Russia’s invasion on Ukraine continues, with its attack and seizure of Europe’s biggest nuclear power plant on Friday, further rattling investors.
Looking ahead over the next week, here are three things to watch that could affect the stock market.
1. Inflation and interest rates
Federal Reserve Chair Jerome Powell said Wednesday during his meeting with the Senate Committee on Banking, Housing, and Urban Affairs that he still sees interest rate hikes coming despite the events in Ukraine.
“The near-term effects on the US economy of the invasion of Ukraine, the ongoing war, the sanctions, and of events to come, remain highly uncertain,” Powell said in his opening remarks during Wednesday’s session. “With inflation well above 2% and a strong labor market, we expect it will be appropriate to raise the target range for the federal funds rate at our meeting later this month.”
He said he will back a quarter-point rate increase when the Federal Open Market Committee meets again on March 15 and 16. This effectively closes the door to the half-point increase investors were expecting for March, which could bring some ease to the markets next week.
Powell and other committee members believe inflation will peak and begin to come down at some point this year. But in the event inflation moves higher, a rate increase above 25 basis points would be on the table.
Later during the meeting, Powell said he expects “a series of rate increases this year” but that the Fed is “going to move carefully” given the current situation, referring to the implications of the Ukraine war on the US economy.
Worried? See our guide to sectors and stocks that guard against higher rates.
2. Mortgage rates
The average rate on the 30-year fixed mortgage had risen nearly a full percentage point from the start of this year up until last Wednesday, when it hit 4.19%, according to Mortgage News Daily.
Mortgage rates fell to 3.9% on Tuesday, before ticking back up to 4.09% on Friday.
If rates continue to pull back next week, it will give homebuyers a bit more purchasing power as they head into the historically busy spring season.
Last month, Zillow said it expects the year-over-year growth rate of home prices to continue to accelerate through the spring, peaking at 21.6% in May and closing the year at 17.3%.
A drop in mortgage rates could motivate homebuyers to move more aggressively because they want to secure a mortgage before rates go up any more. Either way, expect the housing market to stay hot.
Homebuilder stocks like Lennar (LEN), Legacy Housing (LEGH), Taylor Morrison Home (TMHC) and Tri Pointe Homes (TPH) have taken a hit in early 2022, but it could be an opportunity to pick up some shares at more attractive prices ahead of the busy spring season.
Interested in the sector? Check out our guide to homebuilding stocks.
3. Earnings roundup
The second week of March will see a handful of high-profile companies reporting earnings for the previous quarter.
- Dick’s Sporting Goods (DKS). Scheduled for Tuesday. Dick’s said in a January filing that it now expects full-year earnings per share of $13.70 to $13.79, up from previous guidance for $12.88 to 13.06. Earnings per share are expected to be $15.50 to $15.60 compared with previous guidance for $14.60 to $14.80.
- Crowdstrike (CRWD). Scheduled for Wednesday. Aside from the previous quarter’s earnings, investors should watch for some insight into the current state of cybersecurity and cyber warfare amid the Russian-Ukraine conflict and what it could mean for the company going forward.
- Oracle (ORCL). Scheduled for Thursday. Oracle said via tweet on Wednesday that it had suspended all operations in Russia. Investors should listen for any suspected impact this will have on the business.
- Asana (ASAN). Scheduled for Wednesday. Asana CEO Dustin Moskovitz has been on a buying spree lately, picking up more than $1 billion of the company’s stock since last June. In a filing last Friday with the Securities and Exchange Commission, Moskovitz disclosed the purchase of another 1.25 million shares for $88 million.
- Rivian (RIVN). Scheduled for Thursday. After the red-hot start of its first week of trading after going public in November 2021, shares of Rivian have disappointed. Earlier this week, the EV startup abruptly hiked prices to existing orders, citing rising costs of parts and materials. Rivian has since returned existing preorders back to their original prices following backlash from its customers. Nonetheless, the stock has paid the price, dropping almost 26% in this past week. Separately, Baird analyst George Gianarikas cut his price target for Rivian stock to $100 from $150 on Friday. Investors in what was thought to be a major competitor to Tesla (TSLA) will get an idea of where the company stands when it reports its earnings next week.
At the time of publication, Matt Miczulski owned shares of CRWD, ASAN, RIVN and TSLA.
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