Stocks ended their worst week in nearly two years with another round of intense choppy trading on Friday, sending the S&P 500 tumbling below its 200-day moving average, a level of support that had held up since May 2020. Both the S&P and Dow closed out their third straight week of losses, down 5.7% and 4.6% respectively, while the Nasdaq Composite plunged 2.7% Friday and 7.6% for the week, its worst weekly decline since March 2020. It's the fourth-consecutive week of declines for the Nasdaq, which is moving closer to bear-market territory with every passing trading day. The index is down 14.3% from its November highs; a bear market is generally defined as a 20% decline from peaks.
S&P 500 Sectors that dropped the most last week:
- Consumer Discretionary Sector -8.49% (ETF: XLY)
- Communication Services Sector -7.04% (ETF: XLC)
- Information Technology Sector -6.94% (ETF: XLK)
- Financial Sector -6.44% (ETF: XLF)
Top news last week:
- Microsoft to buy Activision Blizzard: Microsoft made an announcement on Tuesday that it had agreed to buy Activision Blizzard in an all-cash deal valued at nearly $69 billion. It would supplant Dell’s $67 billion acquisition of EMC in 2016 as the biggest technology deal in history if it happens. Despite the record price tag, Microsoft has added US$ 1.0tn in market cap in the last year alone, so the deal would represent only a small piece of the company's valuation. Before the announcement, Activision Blizzard shares were also off 40% from their February 2021 peak, resulting in an attractive price point to scoop up the video game developer. After the announcement on the acquisition, the price of ATVI increased by more than 26%. On top of all this, Microsoft has US$ 130bn available in cash, allowing it to fund the deal without needing to raise any debt or issuing stock. The acquisition is, in part, Microsoft’s effort to gain ground on Sony in the console battle. With Activision, Microsoft would get control of the hugely popular Call of Duty first-person shooter franchise, which accounted for two of the three best-selling games on PlayStation in 2021, according to research firm NPD Group. Microsoft also gets World of Warcraft, the proto-metaverse sword-and-sorcery multiplayer game, the role-playing game Diablo, and the multiplayer first-person shooter Overwatch. It also brings Candy Crush, still one of the most popular mobile games (Activision bought Candy Crush publisher King Digital for $5.9 billion in 2016).
- Netflix shares plummet more than 20% after earnings call: Fears of a Netflix (NFLX) slowdown sent shares cratering 20% on Thursday, erasing US$ 45bn of market value as investors prepare for a new phase of slower growth. While the streaming giant beat on both the top and bottom lines, and reported 8.28mn global paid net subscriber additions in Q4, its guidance is what really hit sentiment. Netflix expects to add just 2.5mn subs this quarter, short of the 3.98mn it added in Q1 of 2021, and far below the nearly 7mn expected by analysts. It would also mark the slowest start to a new year for the company in at least a decade. In the past, Netflix has said that services like Disney+ (DIS), HBO Max (T), Paramount+ (VIAC) and Peacock (CMCSA) "wouldn't materially affect growth," but that appears to be no longer the case. "Consumers have always had many choices when it comes to their entertainment time - competition that has only intensified over the last 24 months as entertainment companies all around the world develop their own streaming offering," Netflix said in a statement.
- Intel will Invest $20 Billion in new chip-making facility: Intel announced on Friday that it would invest at least $20 billion in two new chip factories just outside Columbus, Ohio, to add to Intel’s effort to expand its chip-making business. The company has made more than $100 billion in investment pledges over the past year. Intel Chief Executive Pat Gelsinger said the site could eventually grow to accommodate eight chip factories. Planning for the first two factories will start immediately, with construction expected to begin late in 2022, he said, and production is expected to come online in 2025. Mr. Gelsinger said the semiconductor industry, which just topped $500 billion in combined annual sales, is expected to double by the end of the decade. “My intention as CEO is to grow our share of that growing market. So I have to be investing and expanding our capacity faster than doubling,” he said.
Earnings this week:
Monday, January 24: Philips (PHG), Halliburton (HAL) and IBM (IBM).
Tuesday, January 25: Verizon (VZ), Johnson & Johnson (JNJ), Lockheed Martin (LMT), American Express (AXP), Microsoft (MSFT), Capital One (COF), F5 Networks (FFIV) and Texas Instruments (TXN).
Wednesday, January 26: AT&T (T), Boeing (BA), Abbott Labs (ABT), Intel (INTC), Tesla (TSLA) and Lam Research (LRCX).
Thursday, January 27: Tesla (TSLA), Intel (INTC), Comcast (CMCSA), Dow (DOW), McDonald's (MCD), Mastercard (MA), Altria (MO), Southwest Airlines (LUV), Apple (AAPL), Robinhood Markets (HOOD), Mondelez International (MDLZ), Visa (V) and Western Digital (WDC).
Friday, January 28: Chevron (CVX), Phillips 66 (PSX), Charter Communications (CHTR), Caterpillar (CAT) and Colgate-Palmolive (CL).
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