Last week the S&P 500 Index experienced its 7th consecutive weekly decline while the list of companies reporting weaker Q2 forecasts keeps growing. Big retailers such as Walmart and Target slumped after cutting outlooks amid inflation pressure on future profits. As I write this, retailers have recovered some losses after Macy’s and Dollar Tree raised their forecasts.
The tech-heavy NASDAQ composite also fell the last seven consecutive weeks. Snap Inc led losses falling over 40% on Tuesday and Snowflake is tumbling after the company reported slower sales growth forecast for a second quarter in a row.
Snowflake Inc (SNOW) 6-months
Investor sentiment remains little changed. It feels as if investors are waiting for the next catalyst that will dictate the trend from here. The Fed reaffirmed what most investors expected during their May meeting that 50bps rate hikes are to be expected over the next couple of meetings.
The U.S. and NATO countries are boosting aid and arms to Ukraine without triggering chemical or nuclear war with Russia. The effect of the war seems to be priced in as commodities remain strong but have traded sideways in recent weeks. President Putin said today that he is willing to facilitate fertilizer and grain exports if sanctions against Russia are lifted.
Europe’s plan to cut dependence from Russia’s Natural gas by two thirds by the end of 2022 remains in play. Europe plans to import the fuel from the U.S. and Africa as short supplies of Natural Gas were a concern even before the war in Ukraine. Furthermore, China’s Zero Covid policy is expected to be lifted by the end of the year, which would increase the demand for fuel even further. In a normal year, countries would stock up during the summer in preparation for the winter low temperatures. Europe and Asia are on the verge of filling their gas supplies for the winter. The effects of a lack of preparation for the winter could be catastrophic.
Natural Gas (NG) 6-months
News headlines in recent days have said that “stocks see rally amid retail strength.” Looking at the SPDR S&P 500 ETF (SPY) however, we can see that despite it being up over 2%, volume is down over 46%. Hinting that despite the bounce, there is not a lot of money moving into the market.
SPDR S&P ETF (SPY) 3-months
Only time will tell where we go from here. This may prove to be a time when caution and patience rewards investors.