Weekly Market Recap

Published Feb. 18, 2022
Weekly Market Recap

WEEKLY MARKET SUMMARY

Dow Jones S&P 500 Nasdaq
34,079 (-1.77%)
4,348 (-1.44%)
13,548 (-1.60%)

 

Intel boosts its speciality chipmaking capabilities with a $5.4 billion transaction.

On Tuesday, Intel said that it will pay $53 per share, or $5.4 billion, for Israeli chipmaker Tower Semiconductor, a 60% premium over Tower’s Monday closing price. Tower’s shares were selling at a higher premium in premarket trade in the United States, up more than 40%. Tower chips are used in a variety of industries, including medical, automotive, and consumer goods. Intel shares, which have fallen along with other tech equities this year, rose 1.5 percent in premarket trading on Tuesday.

Oil falls as the Ukraine issue appears to be receding following Monday’s rise.

The apparent softening of Russia’s antagonistic posture against Ukraine decreased US oil prices by more than 2.5 percent on Tuesday, according to West Texas Intermediate futures. Russian Ministry of Defense spokesman Igor Konashenkov said in a statement that troops recently posted to Russia’s southern and western military districts, which border Ukraine, had completed their drills and “have already begun loading onto rail and road transport and will begin moving to their military garrisons today.” On Monday, WTI crude surpassed $95 a barrel, its highest level since September 2014.

Berkshire Hathaway purchases Activision stock and increases its stake in Chevron.

According to a regulatory filing, Warren Buffett’s Berkshire Hathaway purchased nearly $1 billion in Activision Blizzard stock in the fourth quarter, moving in ahead of Microsoft’s $68.7 billion acquisition of the video game developer. Berkshire will profit handsomely if the sale goes through. Berkshire increased its Chevron stakes by more than 30% in the fourth quarter. Chevron was Buffett’s first buy, made near the end of 2020, and was widely seen as a perfect bargain move and a bet on the economy’s recovery.

Retail sales increased by 3.8 percent in January, well exceeding expectations as inflation rose.

Consumer spending rose significantly in January, according to the Commerce Department, as rising prices and a post-holiday boom kept cash registers ringing.

Retail sales grew by 3.8 percent for the month, much above the Dow Jones prediction of 2.1 percent.

The data are not adjusted for inflation; nevertheless, the 0.6 percent increase in the consumer price index for the month helped to reverse the 2.5 percent reduction in sales in December, which was revised lower from the previously reported 1.9 percent drop. The CPI grew by 7.5 percent year on year in January. When auto sales were removed, retail sales grew by 3.3 percent after falling by 2.8 percent the previous month.

Online shopping contributed the most in terms of percentage growth, with nonstore retailers reporting a 14.5 percent increase. Furniture and home furnishings sales surged by 7.2 percent, while motor vehicles and components sales jumped by 5.7 percent.

Despite the huge increase in Covid cases caused by the omicron spread, food and beverage sales, which are considered a barometer of the pandemic-era economy, declined only 0.9 percent for the month.

Following quarterly reports, Cisco rises, Nvidia falls, and DoorDash soars.

Cisco Systems, a Dow component, rose about 3% in premarket trade on Thursday after the networking equipment and software business reported quarterly earnings and revenue that exceeded forecasts. Furthermore, the corporation issued upbeat full-year predictions.

Nvidia fell almost 2.5 percent in the premarket after delivering a decent outlook late Wednesday that failed to impress an investor base accustomed to optimistic guidance from the graphics chip titan. However, the company’s quarterly earnings and revenue exceeded expectations.

DoorDash’s shares rose 22% in premarket trade on Thursday, the morning after the firm issued a strong forward forecast and reported a 69 percent increase in full-year sales. Revenue was also slightly higher than predicted for the quarter. However, DoorDash’s quarterly loss per share was more than expected.

Investors concerned about the Russia-Ukraine situation are piling into bonds.

Investors were perplexed by escalating tensions between Russia and Ukraine, so they ditched riskier assets and shifted to the perceived safety of bonds on Thursday and Friday. The 10-year Treasury yield, which moves in the opposite direction of price, has fallen to around 1.94 percent. Traders are anxious about growing inflation and how the Federal Reserve intends to tackle it, all while keeping a watch on geopolitical developments. James Bullard, President of the St. Louis Fed, has cautioned that if interest rates are not raised, inflation will worsen significantly. Bullard wants to raise interest rates by a full percentage point by July.

Roku and Shake Shack have been chastised for issuing worse forecasts.

Roku stock plunged more than 25% in premarket trade on Friday, the morning after the video streaming device company disclosed quarterly sales that fell short of estimates. Higher component prices and supply chain disruptions were also highlighted as causes for the lower-than-expected outlook. The stock had already lost 68 percent of its value in the previous 12 months. Roku received a boost while people were stranded at home due to the outbreak. However, as Covid’s limits have eased, so has streaming demand.

Shake Shack stock fell 15% in premarket trading after the burger company anticipated lower revenues for the current quarter than expected owing to the fast-spreading Covid omicron strain, which drove diners away and forced temporary location closures. Shake Shack did disclose after the bell on Thursday that sales for the most recent quarter were in line with forecasts, and the per-share loss was less than projected.

Inflation and the threat of an invasion of Ukraine fuel the outlook for increased stock volatility.

Investors are weighing positive news about corporate earnings and the labour market against the difficult issues of high inflation, rising bond rates, and geopolitical uncertainty that have marked the start of the year for US stocks.

One conclusion from the markets this week is that 2022 is beginning to resemble what many predicted at the start of the year. Stocks have done better than they did in January, when they fell in anticipation of tighter monetary policies, but they continue to be buffeted by opposing trends that are widely expected to keep prices volatile.

The rise in US government bond yields, fueled by rising expectations for how far the Federal Reserve will raise short-term interest rates this year, is a driving force behind many market moves.

For much of January, analysts were unified in their conviction that this simple relationship was important to stock performance. The yield on the benchmark 10-year US Treasury note jumped to 1.866 percent on January 18 from 1.496 percent at the end of the previous year. Stocks fell first, followed by technology companies, which are particularly vulnerable to rising interest rates because their valuation is solely reliant on future profits potential.

By the end of Friday, the S&P 500 had declined 1.8 percent, marking the fourth weekly decline in the previous six weeks. Investors will be watching the latest developments in the Russia-Ukraine situation, earnings from companies such as ZoomInfo Technologies Inc. and Airbnb Inc., and clues from Fed officials about their plans for the March policy meeting this week as the 10-year yield settles at 1.951 percent, down from 2.028 percent on Thursday.

Cathie Wood’s ARK Stays the Course, Betting Big on Innovation

Cathie Wood’s ARK Investment Management LLC is purchasing more shares of largely unprofitable companies, doubling down on a bet that increasing interest rates will put to the test this year, according to multiple traders and investors.

Ms. Wood’s flagship ARK Innovation ETF has invested more than $400 million in high-growth firms in the last two weeks, including Roblox Corp., Block Inc., and Robinhood Markets Inc. According to the company’s daily trade logs and stock-price data as of Friday, this is the case. She thinks that the enterprises, which encompass video games, digital payments, commerce, and other disciplines, have the potential to alter the globe.

Roblox, Block, and Robinhood have all lost at least 25% of their value in the first six weeks of the year. According to FactSet, more than half of the stocks in the ETF, which trades under the ticker ARKK, will be down 20% or more in 2022.

As a result of low interest rates and huge stimulation, ARK was one of the great winners of the epidemic age, which saw large gains in shares of various underperforming firms as well as cryptocurrencies like bitcoin. Investors in these assets are now confronted with a rising interest-rate environment that is expected to be less forgiving of failing enterprises or those with high valuations.

The ARK Innovation ETF is down 24 percent this year, matching its loss in 2021. The fund has lagged behind the broader stock market, which has been under pressure as well. Following double-digit increases in 2018, the S&P 500 and Nasdaq Composite have plummeted 7.3 percent and 12 percent, respectively, in 2022.

In a $5.8 billion transaction, Blackstone will acquire preferred apartment communities.

As indicated by this acquisition, investor interest in multifamily buildings in Sunbelt states is strong.

Blackstone Inc. will acquire rental apartment company Preferred Apartment Communities Inc. for $5.8 billion, confirming the strong investor interest for multifamily complexes in Sunbelt states.

Preferred Apartment, based in Atlanta, owns around 40 rental apartment properties throughout Georgia, Florida, North Carolina, and Tennessee, totaling approximately 12,000 units. According to the companies, Blackstone’s all-cash purchase values the real-estate investment trust at $25 per share. Preferred Apartment also owns 54 grocery-anchored commercial malls. The rental flats contribute for around 70% of the total value of the transaction.

Multifamily properties, particularly in high-growth areas, are a smart investment. Businesses have been migrating to the Sunbelt states, making them one of the hottest commercial property sectors in recent years. Throughout the Covid-19 pandemic, landlords have been able to raise rents far above inflation.

Preferred Apartment had 107 properties in 13 states as of September 30, the bulk of which were in the Southeast. There are also a few office buildings and preferred equity investments backed by newly completed and under construction multifamily properties.

Home sales in the United States increased by 6.7 percent in January, despite a record-low inventory.

The hot property market in the United States continued into the new year, with buyers rushing to buy homes despite record-low inventory and rising mortgage rates.

The National Association of Realtors announced on Friday that existing-home sales jumped 6.7 percent from the previous month to a seasonally adjusted annual pace of 6.5 million, with sales increasing in all regions of the country. Sales were down 2.3 percent in January compared to the same month last year.

The real estate market is intensely competitive. Real estate professionals feel that rising mortgage interest rates in recent weeks have prompted buyers to move quickly in case rates increase any further. Homes frequently sell for more than their quoted prices in a couple of days. As more homes are purchased with cash, first-time buyers are being pushed out.

Despite this, analysts argue that a scarcity of available properties is hampering purchases. Furthermore, rising property prices and increased lending rates have pushed potential buyers away, making homeownership less accessible.

According to the National Association of Realtors, the median existing-home price increased 15.4 percent from a year ago to $350,300 in January. According to Realtor.com, rising mortgage rates may have a limited impact on housing demand this year due to pandemic-related pressures and limits on home buyers’ ability to obtain a purchase. Chief Economist Danielle Hale commented.

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