The first day of February trading was a relative yawner as the three major indexes finished Tuesday with modest gains. But given that investors just suffered the worst month for stocks since the COVID bear market, they were likely grateful for a quiet, positive session.
If not, they received something a little more exciting in the form of an Alphabet (GOOGL (opens in new tab), +1.7%) stock split.
Earlier Tuesday, the Institute for Supply Management announced that its January manufacturing index declined by 1.1 points to 57.6. (Readings over 50.0 indicate expansion.) That was in line with expectations and showed continuing growth in the manufacturing sector, albeit at a slower pace than in December.
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"The composition of the report was soft, with a small increase in the employment component, but larger declines in the production and new orders components," says Goldman Sachs Economics Research.
The earnings calendar (opens in new tab) had a few events of note, too.
United Parcel Service (UPS (opens in new tab), +14.1%) popped to an all-time high after easily topping the Street's quarterly earnings and revenue forecasts. The better-than-expected results reflected the ongoing surge in online shopping and CEO Carol Tome's efforts to increase profitability.
Meanwhile, Exxon Mobil (XOM (opens in new tab), +6.4%) stock hit a level last seen in 2019. The energy major eclipsed fourth-quarter profit and sales expectations and said it would resume stock buybacks this quarter.
The Dow Jones Industrial Average climbed 0.8% to 35,405, the Nasdaq Composite gained 0.8% to 14,346 and the S&P 500 was 0.7% better to 4,546.
After the bell, Google parent Alphabet surged another 7% or so after announcing a massive Q4 beat and an equally sizable stock split. GOOGL reported 32% year-over-year revenue growth to a record $75.3 billion to easily beat estimates of $72.3 billion. Meanwhile, earnings of $30.69 per share easily cleared consensus expectations for $27.34.
The company also said its board of directors had approved a 20-for-1 stock split on each share of Class A, Class B and Class C stock. Shareholders still must approve the measure. If passed, shareholders of record as of the July 1, 2022, close, would receive on July 15, 2022, a dividend of 19 additional shares of the same class of stock for each share they held.
Other news in the stock market today:
- The small-cap Russell 2000 enjoyed a 1.1% improvement to 2,050.
- U.S. crude oil futures eked out a marginal gain to settle at $88.20 per barrel.
- Gold futures rose 0.3% to finish at $1,801.50 an ounce.
- Bitcoin waffled back and forth for most of the day and finished up just 0.1% higher, to $38,527.63. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
- AT&T (T (opens in new tab)) stock fell 4.2% today after the telecommunications firm said it will divest its WarnerMedia properties, which include HBO, CNN, TNT, TBS and Warner Bros. Studios, as part of its planned merger with Discovery (DISCA (opens in new tab)). The spinoff will give T shareholders 0.24 share for each share they currently own. AT&T also said it will slash its annual dividend, to $1.11 per share from $2.08 per share – a move that was widely expected and caused T to end its reign as an S&P 500 Dividend Aristocrat.
- Pitney Bowes (PBI (opens in new tab)) shares slumped 15.4% after the logistics company reported earnings. In its fourth quarter, PBI reported adjusted earnings of 6 cents per share, missing the consensus estimate for earnings of 11 cents per share. The firm also reported an 8.7% year-over-year decline in global e-commerce revenue, though total revenue of $983.7 million in revenue came in above analysts' average estimate for $691.6 million in sales.
- Cruise stocks were a bright spot on Wall Street today. Among the day's big winners were Carnival (CCL (opens in new tab), +5.7%), Norwegian Cruise Line Holdings (NCLH (opens in new tab), +3.7%) and Royal Caribbean Cruises (RCL (opens in new tab), +4.4%).
The 'January Barometer' Bodes Poorly for Equities, But ...
January performance isn't the market indicator it used to be.
Ryan Detrick, chief market strategist for LPL Financial, recently examined the "January Barometer," first discussed in 1972 by Yale Hirsh of the Stock Trader's Almanac.
Traders sum it up like this: "As January goes, so goes the year."
Specifically, when the S&P 500 has closed January in the green, the index has finished up an average of 11.9% over the final 11 months, and higher 86% of the time. But when the S&P 500 finished January in the red, stocks rose just 2.7% on average in the final 11 months and were higher only 62% of the time.
The good news? "It is worth noting that the January Barometer has been broken lately," Detrick says. "In fact, nine of the past 10 times stocks were lower in January, the final 11 months were higher, with some huge gains in there."
The takeaway? Although hoary market sayings and historical indicators can be entertaining and occasionally useful, past performance – as always – is not indicative of future returns.
The wisest move most investors can make is to build a strong portfolio core (opens in new tab) tailored to their risk tolerances and goals. Vanguard is among a few fund providers that can help you prepare for just about any eventuality, for a song.
To that end, we've focused on handling 2022's specific challenges – inflation, rising interest rates – in our list of 2022's best Vanguard funds (opens in new tab). These stock- and bond-funds are constructed to both benefit from and defend against many of this year's trends.
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