Markets in Turmoil: Ugly Times for Traders

Volatility is the name of the game in 2022.

And a Fed rate hike and big economic data created a perfect storm on Wall Street this week.

Things were looking good on Wednesday. 

The Fed hiked rates 0.5% as expected, voted to start its balance sheet reduction on June 1, and Chairman Jerome Powell said a 0.75% hike is not on the table. 

That sparked a huge relief rally.

Stocks skyrocketed into the close after Powell’s 2:30 p.m. ET presser. 

The Dow closed 2.8% higher, the S&P 500 gained 3%, and the Nasdaq settled up 3.2%.

ETFs that track the major indexes also shot up sharply.

The S&P and the Dow had their biggest gains since 2020.

But then reality set in overnight; the Fed might not be able to avoid a recession, no matter what Powell says. 

And the panic selling peaked on Thursday.

The Dow plunged more than 1,000 points, over 3.1%, while the Nasdaq dropped 5.0 % to its lowest closing level since November 2020. 

It was the largest daily drop for both indexes since 2020. 

And QQQ followed suit.

While the broader market sold off, one specific sector got demolished.

E-commerce stocks got rocked after a series of weak earnings reports thanks to consumers returning to physical stores. 

Wayfair (W) plummeted 26% and hit a fresh 52-week low. 

Shopify (SHOP) shed nearly 15%.

Etsy (ETSY) plunged 17%.

And eBay (EBAY) dropped 12%. 

Even Amazon (AMZN) wasn’t immune from the sell-off, falling about 8%.

Many were hopeful a strong April jobs report on Friday could serve as a life raft. 

But even a big beat on job growth was unable to rescue stocks. 

The major indexes slid further Friday, with the Dow closing 0.3% lower, the S&P 500 falling 0.6%, and the Nasdaq down 1.4%.

It was the 6th straight weekly decline for the Dow.

SPY and QQQ both also extended their losses.

 

The session saw some stocks hit fresh all-time lows. 

Peloton (PTON), a one-time pandemic star on Wall Street, bottomed out at $14.70 per share and ended down 7.7%.  

And that drop came ahead of earnings next week with expectations being low. 

Other pandemic-era favorites aren’t faring much better in 2022. 

Cathie Wood’s Ark Innovation ETF (ARKK) is down 65.6% from its 52-week high, ending Friday’s session 4.4% lower after tumbling 8.9% on Thursday.

High-growth tech stocks aren’t the only ones suffering. 

FAANG is down 34.4% YTD.

Netflix (NFLX) has been hit the hardest, plummeting 70% in 2022. 

Meta Platforms (FB) is down 39.4% YTD.

Alphabet (GOOGL) is down 20.1% this year while Amazon (AMZN) dropped 31.2% despite impending 20-for-1 stock splits for both this summer. 

Apple (AAPL) is faring the best among big tech, falling “only” 11.4% YTD.

 

So is anything up in 2022?

Energy. 

The energy sector has been the bright spot this year thanks to Russia’s war in Ukraine pushing commodity prices to record highs. 

The VanEck Oil Services ETF (OIH) is up 49.8% in 2022.

And the Energy Select Sector SPDR ETF (XLE) has risen 49.4% YTD

But if you don’t own energy stocks, I’d be willing to bet your portfolio is hard to look at right now. 

The question now is whether the market has found its bottom.

But looking ahead to next week, more turmoil may be on the way. 

It’s inflation week with the April Consumer Price Index and Producer Price Index both on the schedule. 

After the March CPI report, there was some talk that inflation had peaked.

We’ll find out next week whether that was true. 

It’s been a hard and fast fall for stocks this year. 

After the original Covid crash in 2020, the market was easy to play.

Buy a dip and watch it rise. 

The Fed was pumping tons of money into the market, Congress was handing out cash to Americans, and retail traders were killing the big hedge funds. 

Every trade felt like a winner back then.

But everything is cyclical and experts say this market was well overdue for a correction. 

How long we’ll stay in a bear market remains to be seen.