Yesterday's market rise proved just a blip as stocks on Thursday returned to the script for most of September by finishing solidly in negative territory.
The decline came as yields on government bonds resumed their climb. After the 10-year Treasury yield notched its biggest one-day decline since 2009 yesterday, it rose 6.2 basis points today to 3.769% (a basis point is 0.01%).
A pair of economic reports did little to lift sentiment. The final reading on Q2 gross domestic product (GDP) confirmed the U.S. economy contracted for a second straight quarter, meeting the technical definition of a recession. Additionally, weekly jobless claims fell more than economists were expecting (193,000 actual vs. 215,000 estimate), hitting their lowest level since April. While this jobs data "would ordinarily be celebrated, on this occasion that resilience could translate to stubborn inflation and more rate hikes," says Craig Erlam, senior market analyst at currency provider OANDA.
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In terms of single-stock movers, Apple (AAPL, -4.9%) took a notable slide after BofA Securities analyst Wamsi Mohan downgraded the tech giant to Neutral (the equivalent of Hold) from Buy, citing weaker consumer demand for its new iPhone 14.
AAPL's decline put more pressure on the major indexes, with the Dow Jones Industrial Average shedding 1.5% to 29,225, the S&P 500 Index giving back 2.1% to 3,640, and the Nasdaq Composite sliding 2.8% to 10,737.
Other news in the stock market today:
- The small-cap Russell 2000 spiraled 2.4% to 1,674.
- U.S. crude futures fell 1.1% to finish at $81.23 per barrel.
- Gold futures ending marginally lower at $1,668.60 an ounce.
- Bitcoin slipped 0.6% to $19,420.50. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
- CarMax (KMX) plummeted 24.6% after the used car dealer reported earnings. In its fiscal second quarter, KMX recorded a 54% year-over-year drop in earnings to 79 cents per share, while revenue ticked up 2% to $8.1 billion. Analysts were expecting earnings of $1.72 per share on $8.5 billion in sales. "On their conference call the company's CEO highlighted broad weakness in the used car market," says Michael Reinking, senior market strategist at the New York Stock Exchange. "This news has hit the auto makers, OEMs and semiconductor stocks hard. One slight positive takeaway from this report is that car prices are moving lower. This has been a big source of inflationary pressure over the last year so we should expect to see this flow through the data in the coming months."
- Bed Bath & Beyond (BBBY) tumbled 4.2% after the home goods retailer said fiscal second-quarter sales fell 28% to $1.4 billion, while its net loss widened to $4.59 per share from 72 cents per share in the year-ago period. Consensus estimates were for revenue of $1.5 billion and a per-share loss of $1.85. Additionally, same-store sales plummeted 26% over the three-month period.
Q4 Stock Opportunities
We're rounding third and heading for home. More specifically, tomorrow marks the end of the third quarter, meaning there's just one more to go in what has been a tough year for stocks.
We're certain to see more volatility through the end of the year, with the third-quarter earnings season set to kick off in two weeks, midterm elections happening in early November and two more Fed meetings on the docket. But we are also entering a historically positive stretch for stocks. Since 1928, the S&P 500 has averaged gains of 0.5% in October, 0.8% in November and 1.4% in December, according to Yardeni Research.
This year's slump creates "incredible opportunity," says Sonia Joao, chief operating officer of Robertson Wealth Management. "Some of our favorite growth names, particularly in technology, are trading at prices we never expected to see again." With that in mind, take a look at the best stocks to buy for the rest of 2022 and beyond. Some of these are familiar names and others are not so well known, but they all present potential opportunities heading into the final quarter of the year.
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