Stock Market Today: Stocks Fall as Fed Lays Out Tightening Plans
Fed minutes show tentative plan for reducing the central bank's balance sheet, some officials' willingness to raise rates 50 basis points at a time.
The major U.S. indexes continued to radiate anxiety on Wednesday heading into and after the afternoon release of the Federal Open Market Committee's most recent minutes.
At last month's meeting, Fed officials tentatively agreed to a quantitative tightening plan that would see the central bank sell off $95 billion in assets each month – $60 billion in Treasuries and $35 billion in mortgage-backed securities. Also, several FOMC members said 50-basis-point hikes to the Fed funds rate could be on the table to help curb inflation.
Stocks, which had largely headed lower all day, turned volatile after the minutes. While they ultimately finished in the red, they did so off the session's lows.
Mega-cap technology (-2.4%) and consumer discretionary (-2.6%) names including Microsoft (MSFT, -3.7%), Amazon.com (AMZN, -3.2%) and Tesla (TSLA, -4.2%) weighed heaviest on the Nasdaq Composite (-2.2% to 13,888). The S&P 500 (-1.0% to 4,481) and Dow Jones Industrial Average (-0.4% to 34,496) also finished lower.
"While the market has taken a bit of a breather anticipating an aggressive Fed posture, some fears may have been put to ease with the release of the minutes," says Mike Loewengart, managing director of investment strategy at E*Trade. "Half-point-basis point hikes are on the table, but that's where the buck stops – it's not guaranteed that half-point increases are the new norm.
"And most predicted that a balance sheet plan would be rolled out, so the market might have already priced that piece in."
Other news in the stock market today:
- The small-cap Russell 2000 slid 1.4% to 2,016.
- Reports the International Energy Agency (IEA) will release 120 million barrels of crude oil from its reserves and data from the Energy Information Administration (EIA) that showed domestic inventories unexpectedly rose last week sent U.S. crude futures tumbling below the $100 per-barrel mark (ending down 5.6% at $96.23 per barrel).
- Gold futures fell 0.2% to settle at $1,923.10 per ounce.
- Bitcoin plunged 4.9% to $43,755.65. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
- JetBlue Airways (JBLU) tumbled 8.7% after the airline made an unsolicited bid to buy fellow travel stock Spirit Airlines (SAVE, -2.4%) for $3.6 billion in cash. This comes after SAVE in February said it was merging with carrier Frontier Group (ULCC, -11.0%) in a deal valued at $6.6 billion – and one that was approved by both companies' boards of directors. In reaction, Raymond James analyst Savanthi Syth downgraded JBLU to Market Perform from Outperform (the equivalents of Hold and Buy, respectively). "While there may be longer term merits to the deal, execution risk is greater than that of the proposed Spirit-Frontier merger with dis-synergies likely to precede any meaningful synergy benefits," Syth writes in a note.
- Rivian Automotive (RIVN) slid 5.0% even as the electric vehicle maker said it is on track to meet its annual production goal of 25,000 vehicles this year. This comes as the company delivered 1,227 vehicles in the first quarter, more than the 929 it delivered in all of 2021. "Given that its production rate should continue to increase in the coming months, we think investors might view its 2022 production guidance of 25,000 units as more achievable than they were previously, which suggests that perhaps the worst of Rivian's operational challenges are behind it," says CFRA Research analyst Garrett Nelson (Hold).
Retail Stocks Could Sing
Inflation might be hot, but so is the money burning a hole through consumers' pockets. The retail industry has been met with more than its fair share of difficulties, including rocketing input costs and supply-chain disruptions, which have only gotten worse amid Russia's invasion of Ukraine.
And yet, retail sales were up nearly 18% year-over-year in February. And the National Retail Federation's outlook for 2022 is for retail sales growth of between 6% and 8%.
"Despite all that's been thrown at them including inflation, supply-chain constraints, market volatility and significant geopolitical events, consumers remain able and willing to spend," says NRF chief Matthew Shay.
Broadly speaking, investors can get access to many of the retailers benefiting from this trend in the consumer discretionary and (to a lesser extent) consumer staples sectors.
But for a short list of some of the current top plays, consider these five retail stocks, each of which boasts a crowded Wall Street analyst bull camp and share-price upside of between 25% and 80%.
