Wall Street’s major indexes struggled to find direction during the week’s final session as investors tried to interpret various signals concerning Russia’s war with Ukraine, and perhaps, looked ahead to next week’s Federal Reserve decision.
Early Friday, Russian President Vladimir Putin said that his negotiators claimed there were “certain positive shifts” in peace talks, although no concrete progress had been made. However, hours later, President Joe Biden announced a pair of economic volleys on Russia.
More significantly, the U.S. will join the European Union and the Group of Seven in revoking the country’s “most favored nation” status, allowing them to slap higher tariffs on the nation’s goods. America also will ban the export of luxury goods to Russia (bourbon is popular there).
Investors might also have one eye looking ahead to next week, when the Fed is widely expected to announce its first benchmark rate hike in more than three years – an assumption that has weighed on sentiment over the past few months, but that Lindsey Bell, chief markets and money strategist for Ally Invest, says is hardly a death knell for stocks.
“Since 1955, the S&P 500 typically performs well in the nine months after the initial interest rate increase before performance begins to moderate,” she says. “This is likely because the initial rate increases are more easily absorbed as they come from low levels. Thinking longer term, remember that over the last four decades, the S&P 500 produced positive returns through six tightening periods.”
The Dow Jones Industrial Average suffered a modest 0.7% decline to 32,944, putting the cap on its fifth consecutive weekly loss. The S&P 500 (-1.3% to 4,204) and Nasdaq Composite (-2.2% to 12,843) also finished in the red on the week.
Other news in the stock market today:
The small-cap Russell 2000 was off 1.5% to 1,979.
U.S. crude futures jumped 3.1% to settle at $109.33 per barrel.
Gold futures slipped 0.8% to finish at $1,985.00 an ounce.
Bitcoin fell 3.2% to $38,356.42. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
DocuSign (DOCU) plunged 20.1% after the electronic signature firm reported fourth-quarter earnings. DOCU announced a better-than-expected profit of 48 cents per share, revenue of $580.8 million and billings of $670.1 million. However, the company gave lower-than-anticipated revenue guidance for the current quarter and full fiscal year. In response, Oppenheimer analyst George Iwanyc downgraded DOCU to Perform from Outperform, the equivalents of Hold and Buy, respectively. “Guidance shows that the challenges seen then with respect to sales execution and resetting post-COVID consumption patterns remain near- to medium-term headwinds,” Iwancy writes in a note. “We believe it could take several quarters for consumption to fully reset and for recent sales adjustments to show results.”
Rivian Automotive (RIVN, -7.6%) reported an adjusted fourth-quarter loss of $2.43 per share, wider than the $1.97 per share analysts were expecting. Revenue of $54 million also missed the consensus estimate. The company maker said it expects to produce 25,000 electric vehicles this year and reported 83,000 reservations as of March 8 – up 16.9% from December. However, CEO RJ Scaringe warned supply-chain issues have hampered production ramp-up and will likely “continue through at least 2022.” CFRA Research analyst Garrett Nelson chimed in after earnings. “The combination of the earnings miss, slower-than-expected production ramp and weak guidance was very disappointing, and the stock’s 12% after-hours drop reflected it,” Nelson writes in a note. “We remain at a Hold.”
There’s More Than One Way to Invest Around Inflation
As Americans bemoan rocketing prices for gas, groceries and just about everything else, corporate America also seems to have inflation on the brain.
On Friday, John Butters, senior earnings analyst for FactSet, revealed the results of a Factset Document Search probing for mentions of the term “inflation” in S&P 500 fourth-quarter earnings conference call transcripts from Dec. 15 through March 11.
“356 cited the term ‘inflation’ during their earnings calls for the fourth quarter, which is well above the five-year average of 144. In fact, this is the highest number of S&P 500 companies citing ‘inflation’ on earnings calls going back to at least 2010 (using current index constituents going back in time),” he says.
These pressures threaten to keep defining Wall Street’s landscape for several more months to come – something more active investors can defend against with stock picks centered on sizzling inflation or even the possibility of stagflation.
But buy-and-holders aren’t entirely without their own countermeasures.
While a typical index fund will keep on buying what its benchmark says it must, come hell or high water, actively managed funds are run by teams that, should they deem it prudent, tailor their investments to better combat pressing macroeconomic issues. Those who prefer a human hand at the wheel might consider several options from Vanguard. While the fund provider has made a name for itself in low-cost indexing, it’s also responsible for a number of well-regarded actively managed vehicles. Check them out.