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Key Takeaways:
- Stocks Fall Under the Weight of Russia-Ukraine Tensions and Break Support
- Russia’s Invasion Is Causing Stocks and Commodities to Move
- Earnings Season Goes on with Mixed Results and Reactions
The Russian occupation of certain regions of Ukraine, along with warnings from the U.S. State Department that Russia is poised to take over the entire country, pushed stocks lower once again on Wednesday. The S&P 500 (SPX) broke an important support level by trading below 4,300. This level held in January of 2022 and October and July of 2021. Depending on which technical analyst you talk to, the next level of support could be between the 4,050 to 4,000 range.
While oil futures closed relatively flat despite a volatile morning of trading, palladium futures rose 3.70%. Russia is the largest producer of palladium. Russia is also a big player in nickel and those futures rose about 1% on the day. Other Russia-related assets are also struggling. Russian ADR Mobile Telesystems (MBT) fell 8.79% on Wednesday. Overnight, the MOEX Russia stock index pared some of its losses from Monday’s 20% sell-off.
The troubles may not be just with Russian companies. President Joe Biden announced new sanctions on Switzerland-based company Nord Stream 2 AG, which built the Russian Nord Stream 2 gas pipeline. If the United States and its allies are willing to target Russian companies specifically, Russian stocks will likely struggle.
The Dow Jones Industrial Average ($DJI) also broke support but is trading just below its June 2021 low. However, the average will likely be weighed down by the S&P 500 if it continues to slide on Thursday. The Nasdaq Composite ($COMP) is testing its May 2021 low and is moving into an area of congestion between the 13,000 and 12,000 levels. While value stocks fared better than growth stocks, the S&P 500 Pure Value Index still fell more than 1%. The S&P 500 Pure Growth Index dropped 2.56%. The energy sector was the only sector to finish the day in the positive. Consumer discretionary and technology were the worst-performing sectors on the day.
Earnings News
After the close, eBay (EBAY) announced earnings that came right in line with earnings estimates but offered a more conservative earnings outlook that missed analyst expectations. The stock fell more than 9% in extended-hours trading.
Booking Holdings (BKNG) rallied 2.84% in after-hours trading on better-than-expected earnings and revenue. The company also offered a more positive outlook saying that it’s seeing “meaningful improvement” on travel trends as Omicron cases continue to fall.
Staying with the travel group, Hertz Global (HTZ) announced a new record profit. This allowed HTZ to beat on earnings estimates but fell short on revenue. The miss on revenue took the stock down about 4% in after-hours trading. Many investors are concerned about the future of all rental car companies. Because of the shortage of new cars during the pandemic over the last two years, rental car companies haven’t been able to replace their vehicles. This means an enormous amount of spending is in the future for these companies.
While people may not be traveling as much, they don’t seem to be afraid to go to the movies. IMAX (IMAX) announced better-than-expected results on top and bottom line numbers. The stock rallied 7.8% after the bell.
While there were several companies announcing earnings before the open on Wednesday, retailers were attracting attention. Home improvement store Lowe’s (LOW) reported that it was able to beat on top and bottom line numbers. LOW squeaked out a 0.29% gain on a very down day.
Discount retailer TJX Companies (TJX) fell more 4.23% after missing on earnings and revenue estimates. CEO Ernie Herrman said that company was experiencing higher sales until the rise of the Omicron variant started keeping shoppers home. Additionally, higher freight expenses drove down margins on merchandise.
Outside of retail, the maker of Dodge and Jeep vehicles, Stellantis N.V. (STLA), reported better-than-expected earnings, prompting it to rally 4.13%. This is the first earnings since the merger of Fiat Chrysler and France’s PSA Group. STLA was able to grow sales 14% for the year despite all the pandemic-related issues. The company expects a 3% increase in sales over the next year.
Mining company Rio Tinto (RIO) reported a 72% increase in earnings for 2021 due to soaring commodity prices. RIO also announced a total dividend for the year of $10.40 per share along with a special dividend of $2.47 per share. The dividend constitutes a 79% payout of underlying earnings for a total of $7.7 billion in dividends being paid.
CHART OF THE DAY: LEISURELY LOOK. The Dow Jones U.S. Travel & Leisure Index ($DJUSCG—candlesticks) … [+]
Data Sources: ICE, S&P Dow Jones Indices. Chart source: The thinkorswim® platform.
Earnings News
The positive earnings announcement from Bookings (BKNG) may help travel and leisure stocks on Thursday, but the group is facing an uphill climb after the Dow Jones U.S. Travel & Leisure Index fell nearly 3% on Wednesday. With that said, the sector has begun to demonstrate relative strength against the S&P 500 and appears to be led by the hotels group.
The Dow Jones U.S. Hotels Index doesn’t appear to have suffered the same problems that the airline group has with COVID-19 and its variants. In fact, Marriott International (MAR) soundly beat earnings and revenue estimates last week, which helped the stock create a new all-time high. Perhaps these are good signs that the end is near—the end of the pandemic that is.
TD Ameritrade® commentary for educational purposes only. Member SIPC.
