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Stock Market Today: Stocks Catch a Second Wind to Start Second Half

U.S. equities managed to escape negative territory Friday and finish in the black despite some downbeat economic data – a welcome beginning to 2022’s second half after a dreadful performance through the midway point.

Front and center Friday was the Institute for Supply Management (ISM) manufacturing index, which delivered its weakest reading in two years. The index’s June reading of 53.0, which was down considerably from May’s 56.1, fell well below economists’ forecasts for 54.5 and marked its lowest point since June 2020.

  • SEE MORE The 15 Best Stocks to Buy for the Rest of 2022

“The new orders component was particularly rough,” say Wells Fargo economists Tim Quinlan and Shannon Seery. “It slipped 5.9 points to 49.2, which marks the first contraction reading since May 2020, when the economy was coming out of pandemic-related lockdowns.”

The pair add that while the report demonstrates slower manufacturing activity, supply problems are continuing to ease. “In short, the report piles onto weaker consumer data received this week and signals investment spending is starting to weaken too.”

From a sector standpoint, utilities (+2.5%) and real estate (+1.8%) were among Friday’s biggest winners as investors appeared to chase yield. But the most noteworthy individual equities were heading in the other direction. Kohl’s (KSS, -19.6%) plunged after announcing it had ended its attempts to sell the company, putting the kibosh on Vitamin Shoppe owner Franchise Group’s plans to buy the struggling retailer. Kohl’s also reduced its second-quarter sales forecast.

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Meanwhile, computer memory firm Micron Technology (MU, -3.0%) warned that it expected its components for smartphones to decline by 5% year-over-year, and PC products to decline 10%. That weighed on the entire industry, as shown by an 3.5% decline in the iShares Semiconductor ETF (SOXX).

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The broader markets, however, shrugged off early-session declines and finished with decent gains to kick off 2022’s second half. The Dow Jones Industrial Average was up 1.1% to 31,097, the S&P 500 improved 1.1% to 3,825, and the Nasdaq Composite climbed 0.9% to 11,127.

And remember: It’s a long weekend for investors, with the stock and bond markets both closed Monday for the Fourth of July.

YCharts

Other news in the stock market today:

  • The small-cap Russell 2000 gained 1.1% to 1,726.
  • U.S. crude oil futures rebounded by 2.5% to $108.43 per barrel
  • Gold futures, which momentarily dropped below the $1,800 mark, finished Friday down 0.3% to $1,801.50 per ounce.
  • Bitcoin recovered by 2.5% to $19,359.05 (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.) 

Deals Have Gone Dormant

The possibility of recession isn’t just being felt in stock prices – it’s also being felt in dealmaking. Well, to be precise, a lack thereof. Says Quincy Krosby, chief equity strategist for independent broker-dealer LPL Financial: 

  • SEE MORE Smart Investing in a Bear Market

“As fears of an imminent recession rise, de-risking in capital markets continues as SPAC (Special Purpose Acquisition Companies) deals, which enjoyed tremendous investor enthusiasm while real rates were negative, continue to unwind. The IPO (initial public offering) calendar remains on hold until markets stabilize and risk appetite returns. Similarly, volume in private equity deals, as well as merger-and-acquisition announcements, have slowed as the overall investing environment faces a host of challenges associated with the global campaign to curtail inflation.”

The fix for that could be the very same thing that would help the stock market get back on its feet: a better-than-expected second-quarter earnings season.

That kind of upside surprise, of course, is no guarantee. So for now, caution is key – and investors looking for a little protection have a wealth of options. These 10 defensive ETFs, for instance, have widely outperformed the broader market and offer stability for anyone expecting more turbulence before the skies finally clear.

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The Best Emergency Loan Companies for Cash and Credit in 2022

Can you afford a several-hundred or -thousand dollar emergency? That’s where emergency loans come in handy. Learn more here.

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Should You Invest in a College Town Rental?

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Stock Market Today: Markets Steady, But Bed Bath, Cruise Lines Tumble

A slow macroeconomic news day resulted in one of the lowest-volume sessions of 2022, though a few individual equities endured more than their fair share of volatility.

The S&P 500, which finished with a small gain Wednesday, posted the index’s smallest intraday range for the year, according to Michael Reinking, senior market strategist for the New York Stock Exchange. “That bit of stability is welcome after the violent reversal seen during yesterday’s session, which saw the early 1% gain in the S&P 500 turn into a 2% loss when all was said and done.”

  • SEE MORE 5 Best Bond ETFs for 2022

Not so for the energy sector (-3.5%), where recent whipsawing continued. U.S. crude oil futures declined 1.8% to $109.78 per barrel as traders waited for news from the Organization of the Petroleum Exporting Countries and their allies (together, OPEC+), which are meeting today and tomorrow. That clipped oil and gas stocks including Devon Energy (DVN, -6.1%) and APA (APA, -6.9%).

A few individual stocks hit the mat even harder. Bed Bath & Beyond (BBBY) fell 23.6% after announcing that quarterly revenues had plunged by 25% to a worse-than-expected $1.46 billion, and that same-store sales (revenues earned in stores open at least 12 months) were off by 24%. And worse –the ship just lost its captain, as BBBY said CEO Mark Tritton has left the company.

Another firm in troubled waters is Carnival (CCL, -14.1%), which dragged down the entire cruise line industry Wednesday after a price-target cut from Morgan Stanley. Analyst Jamie Rollo now sees the stock going to $7 per share (-32% from yesterday’s closing price), with a worst-case scenario in which a global downturn sends the stock to zero.

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“If there is a demand shock that causes trip cancellations or weak bookings … liquidity could quickly shrink,” he says.

Industrymates Royal Caribbean (RCL, -10.3%) and Norwegian Cruise Line Holdings (NCLH, -9.3%) swooned in sympathy.

  • SEE MORE European Dividend Aristocrats: 40 Top International Dividend Stocks

The major indexes didn’t move much, however. The Dow Jones Industrial Average improved by 0.3% to 31,029, while the S&P 500 and Nasdaq Composite slipped marginally to 3,818 and 11,177, respectively.

YCharts

Other news in the stock market today:

  • The small-cap Russell 2000 wasn’t nearly so calm, dipping 1.1% to 1,719.
  • Gold futures gave back 0.2% to end at $1,817.50 an ounce.
  • Bitcoin finished marginally higher to $20,255.00. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.) 
  • Teradyne (TER) slumped 5.2% after BofA Global Research analyst Vivek Arya downgraded the semiconductor equipment manufacturer to Neutral (Hold) from Buy. “We continue to think of Teradyne as a high-quality vendor and leader in the relatively duopoly market of semiconductor testing,” Arya says. “However, TER’s high exposure to Apple (~10% currently but has been 20-25% in the past) exposes the company to large volatility in iPhone demand and Apple design complexity.” He adds that TER’s high-growth industrial automation segment is exposed to any downturn in the global industrial economy and competition from Asia.
  • It was a volatile session for Nio (NIO), which was down nearly 8% at one point after short seller Grizzly Research issued a report accusing the electric-vehicle maker of an “audacious scheme” to “exaggerate revenue and profitability.” Nio replied in a statement, saying the report was “without merit,” bringing the shares close to breakeven in late-morning trading, although they still ended the day down 2.2%. CFRA Research analyst Lim Jian Xiong maintained a Buy rating on NIO, saying more disclosures from the company should be expected. “We think NIO’s EV portfolio expansion (3 SUV and 2 sedan models in 2022) will sustain its strong revenue momentum, drive an improvement in operating leverage, and support our projected turnaround in NIO’s business by Q4 2023,” the analyst added.

Trying to Call a Bottom Misses the Point

How low will the market go, and when will it hit its nadir? While there’s no crystal ball that has the exact answer to either of these questions, Dan Wantrobski, technical strategist and associate director of research at Janney Montgomery Scott, is happy to project a possible bottom, but he stresses that’s not the point.

  • SEE MORE The 10 Best Stocks for a Bear Market

“We still believe the U.S. equity markets are entering the bottoming process of a correction cycle that began well over a year ago,” says Dan Wantrobski, technical strategist and associate director of research at Janney Montgomery Scott. “There is still likely more volatility to come, and within such a framework, we continue to believe the 3,100-3,200 range is a distinct possibility for the S&P 500 in the weeks ahead (before a final low is confirmed).”

However, he says the goal here shouldn’t be to trade these markets on a short-term basis or try to pinpoint an exact bottom. “Rather, it should be to take advantage of significant multiple compression in valuations relative to the long-term growth prospects for the U.S. When viewed from this lens, we believe those investors with longer-term horizons can start to put some money to work in the current environment.” As in, now.

Thus, keep an eye on values. Kiplinger columnist James A. Glassman recently disclosed his own wish list of stocks to buy while they’re down. But the general thrust for investors right now is, if it’s high-quality and bargain-priced, now might be the time to bite – as long as you’re patient. Keep that in mind as you explore these 15 value stocks that seem ripe for a renaissance.

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Earn up to 10 points per dollar spent this summer: Targeted Chase spend bonuses – The Points Guy

Editor’s note: This guide has been updated with the latest information.

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11 Credit Cards With the Best Extended Warranties

This perk is more common — and more valuable — than many people realize.