Markets Suffer Tough Short Trading Week; Crypto Continues to Slide

Not even a shorter trading week with markets closed Monday for Martin Luther King Jr. Day could save stocks and cryptocurrencies from falling across the board. The S&P 500 is down more than 5% as 2022 gets off to a rotten start as investors pull out of stocks and cryptocurrencies with Bitcoin (BTC) down more than 11% this week and Ethereum (ETH) down 17% over the past week. Disappointing recent economic data and earnings reports with lower-than-expected guidance and worldwide coronavirus cases are partly responsible for the bearish turn.

economic data

It was a relatively light week for economic data, as new housing data for December came in and jobless claims suddenly rose.

Housing starts and building permits for December exceeded economists’ estimates with 1.7 million and 1.87 million reported, respectively. Consensus estimates were about 1.65 million and 1.7 million each. Both numbers were also an increase from November’s data of 1.68 million housing starts and 1.72 million building permits. However, existing home sales fell from an annual rate of 6.48 million to 6.18 million in December, and analysts had expected sales to remain steady at 6.5 million.

Meanwhile, initial jobless claims jumped surprisingly from 231,000 to 286,000, the highest level reported since mid-October last year. Economists had expected claims to actually fall to 211,000. In addition, continuing claims rose from 1.55 million to 1.64 million. Prior to this report, initial claims had recently settled near the pre-pandemic range of about 200,000 new weekly claims. Continuing claims in the meantime are now about the average set before the pandemic. The sudden jump in initial claims is likely an indication of the negative effects of the Omicron virus on the job market.

earnings season

Earnings season has officially started and several large financial institutions reported quarterly performance this week with the primary focus on banks and airlines. Bank earnings were largely mixed with Goldman Sachs (GS) shares plunging as a result of missed guesses due to earnings down 13% from a year ago partly due to weak trading activity. Meanwhile, Truist (TFC) and PNC (PNC) shares held steady as each slightly outperformed estimates with PNC raising its guidance as well. However, both Truist and PNC along with Bank of America (BAC) saw stocks fall at the end of the week as markets in general continued to slide.

Meanwhile, United Airlines (UAL) and American Airlines (AAL) both saw their stock prices fall after earnings reports despite each aircraft beating earnings and revenue estimates. American reported its second consecutive annual loss to the pandemic while United still had less capacity than in 2019 and warned that the Omicron variant would delay any travel recovery.

Netflix crash

Finally, Netflix (NFLX) suffered its worst trading day in recent memory as its stock plunged 21.79% on Friday. The one-day loss was the worst since July 25, 2012 when it fell 25%, in nearly ten years. The streaming service actually managed to report better-than-expected earnings and revenue for the past quarter, but it again reported slower subscriber growth. The company has blamed increasing competition for cutting its growth as more and more streaming platforms rise with their first-party content.

Overall, the S&P 500 fell 5.68%, the Dow Jones Industrial Average fell 4.58%, and the Nasdaq lost 7.52%.

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