Stocks dipped into bear market territory on Friday, with the S&P 500's decline from its January all-time high hitting 20% at one point, before a late-session reversal lifted the benchmark index to a flat finish. Much of the decline in investor confidence recently stems from lackluster retail earnings, which has raised fears that a consumer-led downturn is approaching, on top of the inflation and supply chain challenges that have weighed on sentiment for weeks. For the week, the Dow Jones average lost 2.9% for its first eight-week losing streak since 1923, while the S&P lost 3% for the week and the Nasdaq slumped 3.8%, with both posting seven-week losing streaks.
Top news last week:
• Disappointing retail earnings: Shares of the Target (TGT) slumped 25% as Q1 results came in far from the analysts’ estimates, hammering the entire retail sector from Costco (COST) to Dollar Tree (DLTR) and Dollar General (DG). The big earnings miss (and halving of profits) at Target was driven by a shift away from higher-margin goods such as kitchen appliances and TVs to basics like food and toiletries. In fact, operating margins were reported to be 5.3% during the quarter, falling heavily from the 9.8% seen in the same period last year and below the company's long-term goal of 8%. "Retailers are starting to reveal the impact of eroding consumer purchasing power," explained Paul Christopher, head of global market strategy at Wells Fargo Investment Institute, which has predicted a recession around year-end into early 2023. "The consumer's ability to spend is eroding at a faster pace than it was a month or two ago. We think that pace is going to accelerate further."
• Top 10 Stocks Hedge funds bought in Q1: At the end of each quarter, hedge fund managers who have more than $100 million in assets under management have to reveal their portfolio positions within 45 days as part of their 13F filing. The deadline for the first quarter of 2022 reports was May 15. Looking at what funds have recently bought is even more relevant this quarter. The stocks these funds held at the end of March are trading at much lower prices today. So it's an excellent opportunity to revisit these ideas if you have a multi-year time horizon. According to seeking alpha, top hedge funds have bought the following stocks the most during q1 of 2022: Amazon (AMZN), Microsoft (MSFT), Meta Platforms (FB), Block (SQ), Visa (V), Snowflake (SNOW), Mastercard (MA), Alphabet (GOOG), Tesla (TSLA), Adobe (ADBE), Cloudflare (NET), DexCom (DXCM) and Uber (UBER).
• Apple has shown its mixed reality headset to its board of directors: Apple Inc. executives previewed its upcoming mixed-reality headset to the company’s board last week, indicating that development of the device has reached an advanced stage according to Bloomberg. In recent weeks, Apple has also ramped up the development of rOS -- short for reality operating system -- the software that will run on the headset, according to other people familiar with the work. That progress, coupled with the board presentation, suggests that the product’s debut could potentially come within the next several months. The headset, which combines elements of virtual and augmented reality, is Apple’s next big bet. It represents the company’s first major new product category since the Apple Watch in 2015.
