The S&P 500 Index gained close to 2% higher in the last week that ended on February 4, 2022. However, the world’s most popular index is still down 6% in 2022. So, let's see if the S&P 500 index will stage a turnaround this week or will it continue to trend lower in the near term.
Shares of Meta Platforms and PayPal led losses in the past week
Last week, tech giants such as Meta Platforms (NASDAQ: FB) and PayPal (NASDAQ: PYPL) reported their quarterly results for Q4 and 2021. Investors were disappointed with Meta that reported a decline in its user base for the first time ever.
Further, data regulations related to Apple’s hardware products could adversely impact the company’s ability to target ads and impact top-line by as much as $10 billion. In an SEC filing, Meta also claimed data tracking rules in Europe might compel the company to shut down Facebook and Instagram platforms in the continent.
We can see why investors were worried about Meta’s tepid user growth and decelerating revenue growth that led to a 26% fall in stock prices in a single trading session wiping off over $200 billion in its market cap.
Fintech giant PayPal also saw its shares fall by over 20% following its Q4 results. It reported revenue of $6.9 billion and adjusted earnings of $1.11 in Q4, compared to consensus revenue and earnings estimates of $6.86 billion and $1.12 per share respectively. However, it forecast earnings between $4.6 and $4.75 in 2022, which were below estimates of $5.25.
Alternatively, the e-commerce heavyweight, Amazon (NASDAQ: AMZN) saw shares rise by 13.5% on Friday after its Q4 sales touched $137.4 billion, compared to estimates of $137.56 billion. Its adjusted earnings stood at $5.8 per share which was 63% above its consensus estimates of $3.57 per share.
Amazon’s cloud sales stood at $17.8 billion in Q4, up from $12.7 billion in the year-ago period. Amazon Web Services also reported an operating income of $5.3 billion versus $3.56 billion in Q4 of 2020.
Inflation data might drag stocks lower
The major indices including the S&P 500 are range-bound in pre-market trading today. But the consumer price index data will be released on Thursday while the consumer sentiment survey will be reported on Friday which are likely to impact investors. There may be a sequential improvement in inflation numbers for February. But experts believe inflation to be up 0.4% in January, which translates to a 7.2% increase on a year-over-year basis.
Several consumer staples companies including Kellogg’s (NYSE: K) and Coca-Cola (NYSE: KO) will also report earnings this week and will be closely watched by investors to see if rising costs and supply chain disruptions have impacted profit margins.
Alternatively, Treasury yields fell this morning after a surge in the last week. The yield on the 10-year Treasury note was down by three basis points at 1.9014% while the 30-year Treasury bond slipped three basis points as well to 2.1934%.
A primary reason for the decline was the jobs data released by the Labor Department on Friday which stated 467,000 jobs were added in January. Comparatively, economists expected an addition of 150,000 jobs while analysts projected net jobs losses for the month due to rising COVID-19 cases.
The bottom line
Wall Street believes cyclical and value stocks will outpace growth stocks in an inflationary environment, especially where the Federal Reserve will raise interest rates multiple times in 2022.
So, investors should expect the tech-heavy NASDAQ to underperform other indices in the next 12-months.
Disclaimer: The writer is an experienced financial consultant who writes for Finscreener.org. The observations he makes are his own and are not intended as investment or trading advice.
