Key Takeaways

New 2022 Lows Set by Major Indexes as Selling Erases Midweek Rally 

Q3 Ends Tomorrow with Markets on Pace for Third Straight Quarterly Loss

Dollar, Yields Pull Back Slightly, but Market Doesn’t Get a Lift

 Shawn Cruz, Head Trading Strategist, TD Ameritrade

(Thursday Market Close) After a one-day break, Wall Street returned Thursday to its old ways as investors swooped in to sell the latest rally. Major indexes plunged to new lows for 2022 as inflation concerns and sharp losses in Apple (AAPL) drove selling. For many investors, uncertainty in the markets is turning to outright pessimism, never a good thing for risky assets.

The S&P 500® (SPX) fell more than 2% to a fresh closing low for the year of 3,640, not far off its softest point of the day. The Nasdaq® (COMP) took a worse hit of 2.8%, thanks partly to AAPL and general weakness across the information technology sector. The small-cap Russell 2000® (RUT) finished in between with a 2.5% loss. The Dow Jones Industrial Average® ($DJI) lost 1.54% to finish at 29,225.61.

It didn’t take long Thursday to see that Wednesday’s gains—based partly on news that the Bank of England is intervening in the bond market—had no staying power. Tomorrow is the final day of Q3, and the SPX is on pace to post its third straight quarterly loss for the first time since the Great Recession of 2008–2009.

Some of the biggest growth companies, including AAPL, Meta (FB), Microsoft (MSFT), Alphabet (GOOGL), and Nvidia (NVDA), are now approaching their respective 52-week lows, many of which were posted in June. If those lows can’t hold, it could conceivably drive even more selling. Consider monitoring those growth company lows over the next few sessions to see if they stay in place because that could provide clues about where the market goes next.

After the close, Nike (NKE) announced it beat earnings and revenue projections with Q1 earnings per share of $0.93 and revenues of $12.68 billion. The company’s shares traded 2.5% lower after the close.

This quarter will wrap not a day too soon for many investors. The SPX is down around 5% so far in Q3, which doesn’t sound too terrible until you see it’s off nearly 16% from its quarterly high posted in mid-August.

Surprisingly, some of the market’s biggest “fear factors” like the Cboe Volatility Index® (VIX), 10-year Treasury yield, and U.S. Dollar Index ($DXY) all were off recent highs Thursday, which normally would seem to indicate a little less weight on the stock market. The dollar softened a bit today, so that’s something if you’re looking for one bit of cheer.

However, the market is in a technical and psychological rut, with rallies posting lower highs, selloffs hitting lower lows, and little investor interest in any kind of extended new buying. At this point, it appears most investors are treating rallies as a selling opportunity, and the market has closed lower in seven of the last eight sessions.

Oddly enough, continued strength in some labor-related U.S. economic data might be behind this steady decline on Wall Street. Today’s weekly initial jobless claims data came in well below expectations and at a five-month low of 193,000. The Fed is doing everything it can to slow the economy, and that’s showing up in certain data like housing but not on the labor side of things. That means focus will likely turn to next week’s September payrolls report, and we’ll see if that can flush out more details about the job market.

In the meantime, news of corporate cutbacks—including layoffs from some major firms—seems to be diametrically opposed to what’s showing up in the data.

The VIX actually stayed pretty well under control Thursday despite the stock market upheavals, hovering near 33. That’s still below highs from earlier this year, and below an important resistance level on the charts between 35 and 37 (see chart below)

And the 10-year Treasury yield, which topped 4% for the first time in more than a decade earlier this week, hung out below 3.8% much of the day Thursday. That was up from Wednesday’s lows but still relatively soft compared with action seen a few days ago.

Key inflation data looms tomorrow, along with a couple of Fed speakers. 

CHART OF THE DAY: DANGER AHEAD? The VIX (candlesticks) is fast approaching some dangerous chart territory. The rectangular area just above current levels represents an important resistance range between roughly 35 and 37 compared with highs so far this week in the 32 to 33 range. The VIX is approaching levels last seen in June and before that in early spring; a push above this range could be another pressure point on stocks. Data Source: Cboe®. Chart source: the thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results.

Apple Weighs

Apple (AAPL) and its nearly $2.3 trillion market cap put pressure on the information technology sector and the major indexes as its shares plunged almost 5% to nearly three-month lows. A downgrade from Bank of America (BAC) following reports that AAPL saw falling demand for iPhones weighed on AAPL shares. When AAPL coughs, the market often gets the flu, thanks to the SPX being a market cap-weighted index and AAPL having the largest market cap in the SPX. Basically, big moves in AAPL and other large stocks like MSFT swing a lot of weight in how the SPX performs on any given day.

Notable Calendar Items

Sep 29: Gross domestic product and earnings from Nike (NKE), Micron (MU), CarMax (KMX), Carnival (CCL), and Bed Bath & Beyond (BBBY)

Sep 30: August PCE Price Index, Personal income and spending, Chicago PMI, and September Michigan Consumer Sentiment

Oct. 3: September ISM Manufacturing PMI

Oct. 4: August JOLTS job openings, August Factory Orders, and earnings from Acuity Brands (AYI)

Oct. 5: September ADP Nonfarm Employment, September ISM Non-Manufacturing Index, and Trade Balance

Oct. 6: Earnings from Conagra (CAG) and McCormick (MKC)

Oct. 7: Nonfarm Payrolls, Wholesale Inventories, and earnings from Tilray (TLRY)

Oct. 11: Earnings from PepsiCo (PEP)

Good Trading,

Shawn Cruz

Helpful Educational Content and Programming

Check out our upcoming Webcasts or watch any of our hundreds of archived videos, covering everything from market commentary to portfolio planning basics to trading strategies for active investors. You can also deepen your investing know-how with our free online immersive courses. No matter your experience level, there’s something for everybody.

Looking to stay on top of the markets? Check out the TD Ameritrade Network, live programming which brings you market news and helps you hone your trading knowledge. And for the day’s hottest happenings, delivered right to your inbox, you can now subscribe to the daily Market Minute newsletter here.

TD Ameritrade Network is brought to you by TD Ameritrade Media Productions Company. TD Ameritrade Media Productions Company and TD Ameritrade, Inc., are separate but affiliated subsidiaries of TD Ameritrade Holding Corporation. TD Ameritrade Holding Corporation is a wholly owned subsidiary of The Charles Schwab Corporation. TD Ameritrade Media Productions Company is not a financial advisor, registered investment advisor, broker-dealer, or futures commission merchant.