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.”
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.
“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.
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.
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.
“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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