Stocks seek bottom, and 2 other things to watch in the market next week

Posted: 6 May 2022 3:17 pm
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Stock losses mounted this week, but will that continue? Also: Notable earnings and Bitcoin nears 2022 low.

Stocks reversed sharply Thursday, completely wiping out Wednesday’s gains amid a broad market selloff that delivered investors one of the worst single-day declines since the early days of the pandemic.
The Dow Jones Industrial Average (DJIA) lost 1,063 points, or 3.12%, to close at 32,997.97, its largest decline since October 2020, according to data from Investing.com. The tech-heavy Nasdaq Composite fell 4.99% to finish at 12,317.69, its largest single-day drop since June 2020. The S&P 500 fell 3.44% to 4,152.38, its second worst day so far this year.
The only sectors in positive territory at the time of this writing Friday afternoon were energy and utilities.
As we look into the week ahead, here are three things to watch in the stock market that could affect your portfolio.

1. Experts say the market rout isn’t over yet

Some experts are attributing the past four months of market declines to investor uncertainty about how to price in inflation and slowing growth, and say the sell-off has further to run.
“Paralysis rather than panic best describes investor positioning,” Bank of America analysts led by Michael Hartnett said in a note to investors obtained by Bloomberg. “’Recession shock’ was priced-in too quickly; this is a problem as stronger-than-expected economic data in the first half is causing the market to price-in longer/bigger inflation/rates shock.”
Investor uncertainty was definitely on full display this week. Wednesday’s impressive gains were completely erased and thensome in the next trading session.
Federal Reserve Chairman Jerome Powell said Wednesday that the Fed wasn’t “actively considering” raising interest rates by 0.75 percentage points at future meetings, which led to a late-day market rally. These gains were erased Thursday as investors reassessed the Fed’s comments. Fed rate hikes slow the economy, which can lead to recession.
The Nasdaq, S&P 500 and DJIA are now diving to new lows, and the rout might not be over yet.
“Base case remains equity lows, yield highs yet to be reached,” BofA strategists led by Michael Hartnett wrote in a note.
Morgan Stanley is echoing the same outlook, saying in a note to investors early last week that it thinks the S&P 500 is “ready to join the ongoing bear market.”
“The market has been so picked over at this point, it’s not clear where the next rotation lies. When that happens, it usually means the overall index is about to fall sharply, with almost all stocks falling in unison,” Morgan Stanley analyst Mike Wilson said.
Though Wilson thinks inflation has likely peaked, he believes it will likely continue to be a headwind for many sectors and companies.
“This is why we’ve been positioned defensively and in stocks with high operational efficiency,” Wilson said.
For more information on stocks and sectors that tend to hold up best when markets pull back at least 20% from their recent highs, check out our guide to investing in a bear market.

2. Earnings roundup

Next week’s earnings include a number of high-profile companies investors will be watching.
COVID vaccine players BioNTech (BNTX) and Novavax (NVAX) report Monday, a week after Pfizer (PFE) and Moderna (MRNA) both beat first-quarter earnings expectations. Meme-stock AMC Entertainment (AMC) also reports Monday. The stock rallied 166% back in March, a year after retail investors forced an epic squeeze of it and a handful of other heavily-shorted stocks, but has since given up those gains.
A handful of reopening stocks are slated to report Tuesday, including Hyatt Hotels (H), Norwegian Cruise Line Holdings (NCLH) and Wynn Resorts (WYNN). Stay-at-home darling Peloton Interactive (PTON) is also due to report Tuesday. The stock is trading at an all-time low as pressure continues to mount under the company’s new CEO, Barry McCarthy.
Investors will want to keep their eye on Disney (DIS) when it reports Wednesday. The company should provide an outlook on its streaming business, which could move the media and streaming sector. Electric-vehicle (EV) players Toyota Motor (TM) and Rivian Automotive (RIVN) are also scheduled to report Wednesday.
Here are some of the most notable companies scheduled to report next week, which could move some closely-watched stocks.
Monday, May 9

Tuesday, May 10

Wednesday, May 11

Thursday, May 12

Friday, May 1

3. Bitcoin flirts with 2022 low

The price of Bitcoin (BTC) followed the stock market sell-off Thursday with the deepest plunge in one day in more than three months.
Bitcoin lost 8% to close at $36,575.14 Thursday, though the crypto was down as much as 10% at one point to its lowest level since January 2022, according to data from CoinMarketCap. It was the digital coin’s second worst day so far this year.
Bitcoin has been trading between $47,000 and $35,000 for much of this year, well off its all-time high of around $69,000 reached in November 2021.
Experts are now warning that Bitcoin could crash by as much as $10,000 from its current price to as low as $28,000, Forbes reported Tuesday, citing a tweet from author and veteran trader Peter Brandt.
If Bitcoin continues to fall next week, the next level of support could be around the $35,000 mark.

Interested in cryptocurrency? Learn more about the basics with our beginner’s guide to Bitcoin, dive deeper by learning about Ethereum and see what blockchain can do with our simple guide to DeFi.

At the time of publication, Matt Miczulski owned BTC and shares of BNTX, NVAX, PFE, MRNA, AMC, PTON, PLUG, RIVN, OXY and VORB.

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