Stocks Drop As Dow, S&P Head for Fourth-Straight Weekly Decline

The major indexes are heading for another consecutive drop, as Caterpillar Inc. (CAT) and Chevron Corp. (CVX) reported earnings that disappointed investors.

The Nasdaq fell, on its way toward a fifth-straight weekly drop, despite Apple Inc. (AAPL) shares rising. The iPhone maker reported record sales and profit.

Robinhood Markets Inc. shares plummeted after the trading platform reported a wider-than-expected fourth-quarter loss. One year after the meme stock craze, Robinhood has fallen from its $60 billion valuation to less than $10 billion.

Key Takeaways

  • The Dow and S&P 500 are on their way to a fourth-straight weekly loss as earnings from Caterpillar and Chevron disappointed investors
  • The Nasdaq is heading for a fifth-straight weekly loss, despite Apple rising on record quarterly results. Robinhood shares sinking.
  • The S&P 500 and the Nasdaq have both fallen into correction territory—down more than 10% from recent highs.
  • University of Michigan's Consumer Sentiment Survey posted a cumulative loss of 4.8% this morning, sinking to its lowest level since November 2011.

Stocks dropped after another volatile session yesterday marked by a rally, then a selloff, and a recovery. Investors weighed mixed corporate earnings and the looming threat of Federal Reserve rate hikes along with some positive news. The Dow is 0.3% lower for the week, while the S&P 500 is down 1.6%, and the Nasdaq lost 1.4%. The S&P 500 and the Nasdaq have both fallen into correction territory—down more than 10% from recent highs. 

While Dow components Caterpillar and Chevron fell, Charter Communications Inc. (CHTR) shares jumped after reporting results that beat estimates. Colgate-Palmolive Co. (CL) rose on its earnings forecast and Weyerhaeuser Co. (WY) rose on earnings that beat estimates.

The Commerce Department reported its Personal Consumption Expenditures (PCE) Price Index, the Fed's preferred gauge of inflation, rose 0.4% in December and 5.8% year-over-year. Excluding food and energy, the core PCE Price Index rose 4.9% from last year, in the largest annual increase since 1983.  

pce

The University of Michigan released its final reading of its Consumer Sentiment Index this morning. The index fell to 67.2 from December's 70.6, as higher prices continued to weigh on consumers. Sentiment fell throughout January, posting a cumulative loss of 4.8%, sinking to its lowest level since November 2011.

Bonds, Oil

The yield on the two-year Treasury note rose to 1.2%, while the yield on the 10-year Treasury note hasn’t risen as quickly, suggesting investors see the Fed’s looming interest rate hikes curbing economic growth.

Oil prices are set to post a sixth week of gains amid ongoing supply concerns. Crude oil jumped more than 2% to about $88.50 a barrel. The euro surged against the dollar and major cryptocurrencies declined.

Today's Headlines: Quick Hits

Shares of Robinhood Markets Inc. (HOOD), the investment app which investors flocked to during the GameStop short squeeze one year ago, saw shares plummet after-hours yesterday upon reporting a wider-than-expected fourth-quarter loss. Shares were trading as high as $70 in August; this morning, they stand at $11.

SoftBank’s (SFTBY) Chief Operating Officer, Marcelo Claure, is leaving the company. Claure is considered the right-hand man to CEO Masayoshi Son and credited with cleaning up problems at the Japanese giant’s struggling investments like WeWork.

Home Depot Inc. (HD) is naming a new CEO, promoting COO Ted Decker to the top spot. Current CEO Craig Menear will serve as Home Depot’s chairman of the board.

Shares of Visa Inc. (V) are surging after the company beat analyst estimates for its latest earnings. Visa attributed the strong results to a jump in e-commerce transactions, increased travel revenue, and the economic recovery.

Shares of Western Digital Corp. (WDC) are sinking after the company forecast disappointing revenues. The maker of disk drives and memory chips also tapped Dialog Semiconductor executive Wissam Jabre to be its new Chief Financial Officer.

Biogen Inc. (BIIB) said it would sell its biosimilar joint venture to partner Samsung Biologics for about $2.3 billion. The sale comes on the heels of the disappointing launch of Biogen’s Alzheimer’s drug, Aduhelm.

Apple's Record Quarter: The Big Story

Apple posted record quarterly earnings that beat in every category except one: iPads. Sales of iPads sank 14%, much worse than estimates of a fall of just 3%. 

CEO Tim Cook said that although the company was affected by supply chain disruptions, those problems appear to be easing. However, Cook said the drop in iPad sales was due to significant supply constraints. Apple couldn’t make enough iPads and decided to prioritize other devices for parts, like the new iPhone 13. 

Meanwhile, Apple reported another big jump in its services business, which has become the company’s most profitable business and added to higher-than-expected gross margins of over 43%. Those services include Apple TV+, Apple Music, App store fees, and the iCloud. They added nearly $20 billion, a jump of 25%. During the company’s conference call, Apple CFO Luca Maestri said Apple services had a total of 785 million paying subscribers, an increase from last quarter’s 745 million.

Apple may also add a new service: small business payments. According to Bloomberg, Apple is planning a new service that would let businesses use their iPhones as payment terminals without any additional hardware. The move is aimed at putting pressure on Block’s Square (SQ) terminals. Apple’s payment service is expected to be part of the new iOS which will be launched this spring.

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