The stock market continued to sell off, with the major indexes plunging to fresh 52-week lows before bouncing somewhat late in the week. Consumer inflation cooled slightly in April, but not as much as hoped. The 10-year Treasury yield reversed lower from a three-year high on concerns that Fed rate hikes to tame inflation will take a heavy toll on economic growth. Apple and Tesla hit 2022 lows, joining the other megacaps, while highly valued growth stocks such as Unity Software and Coinbase were crushed. Defensive stocks held up better, but market losses were sharp and broad-based. Cryptocurrencies plunged amid the stock market sell-off and as "stablecoins" crashed from dollar pegs.
Stocks Tumble To 52-Week Lows
The Dow Jones, S&P 500 and Nasdaq composite fell sharply to their lowest levels in at least a year, as a hot inflation report fanned the flames of a market correction. Friday's rebound only pared sharp losses. The 10-year Treasury yield skidded well below 3% after hitting a three-year high of 3.17% intraday Monday. Bitcoin and other cryptocurrencies plunged amid the market sell-off and as stablecoins crashed from dollar pegs.
Inflation Cools, But Not Enough
The CPI inflation rate dipped in April from March's likely peak, but the first step down was smaller than expected and didn't provoke any sighs of relief. The consumer price index rose a faster-than-expected 0.3% vs. March. Core CPI, which strips out food and energy, climbed a worrisome 0.6%. The annual CPI inflation rate dipped to 8.3% from 8.5%, while the core rate slowed to 6% from 6.5%. While inflation on prices of goods is now ebbing, service-sector inflation is still accelerating. Thursday's producer price index showed wholesale inflation easing, though less than expected, to 11% from 11.5%. The Federal Reserve still has its work cut out for it to dampen demand enough — but not too much — to dampen inflation, and that means a tough near-term ride for the stock market.
Musk Puts Twitter Deal 'On Hold'
Elon Musk tweeted Friday that he is putting his "Twitter deal temporarily on hold," saying he wants more details on a Twitter estimate that spam and bot accounts are less than 5% of total users — something the social network has said many times. Twitter crashed more than 25% at one point before Friday's open, but pared losses as Musk later tweeted that he is "still committed to the acquisition." But the tweets heightened fears that Musk could walk away from the deal or renegotiate the price. Twitter stock fell sharply for the week, retreating further from the $54.20 purchase price.
Tesla China Woes Continue
Tesla Shanghai production tumbled to 10,757 vehicles in April, while deliveries cratered 98% to 1,512, according to the China Passenger Car Association. The Shanghai plant was closed due to China's Covid lockdowns from March 28 until April 19, when limited production started again. Overall EV and auto production in China tumbled in April. This week, the Shanghai plant once again all but stopped production due to supply snags. Tesla recently started EV shipments to Europe. Tesla stock plunged during the week, setting a 2022 low, before rebounding late in the week.
Upbeat Chip Reports Fail To Impress
GlobalFoundries and Microchip Technology each delivered beat-and-raise reports for the March quarter. But investors remain negative on semiconductor stocks. Malta, N.Y.-based GlobalFoundries grew sales 37% and swung from a year-earlier loss to a much-bigger profit than expected. Chandler, Ariz.-based Microchip said its earnings jumped 45% while sales increased 26% in the March quarter. Both chipmakers are supply constrained and reported positive demand trends.
Tyson Growth Accelerating
Tyson Foods raised the low end of its revenue outlook as consumers are accepting higher food prices, offsetting cost pressures across its supply chain. Tyson earnings jumped 71% in fiscal Q2, accelerating for a second straight quarter and beating views. Revenue rose 16%, slowing from Q1's 24% but also beating.
Li Auto Surprises, Rivian Sticks To Delivery Target
Li Auto posted a surprise profit for the March quarter while revenue also beat with a 167.5% surge to $1.51 billion. But the China EV startup's delivery and revenue guidance disappointed, amid China's Covid-19 lockdowns. A new hybrid SUV will now arrive in Q3, after delays. Rivian sharply narrowed losses to $1.43 per share while revenue of $95 million missed views. Rivian maintained 2022 delivery guidance. Shares rebounded late in the week after plunging to record lows as Ford trimmed its stake in the company.
Pfizer To Buy Biohaven
Pfizer will pay about $11.6 billion to acquire Nurtec-maker Biohaven Pharmaceuticals in a deal one analyst says "couldn't have come at a better time." The deal, which values Biohaven at a 33% premium to its three-month volume-weighted average, includes Biohaven's eight anti-CGRP drugs. CGRP is a peptide associated with migraines. Other medicines will be wrapped under a new company called "New Biohaven."
News In Brief
Metaverse stocks Roblox and Unity Software each posted disappointing results for the first quarter. Roblox missed its sales and earnings targets as bookings declined. Unity posted an in-line first quarter but badly missed views with its sales guidance for the second quarter and full year.
BioNTech reported adjusted EPS surged 206%, easily beating Q1 views. Revenue nearly tripled to roughly $6.75 billion, obliterating forecasts for $4.59 billion.
Data center operator Switch agreed to be acquired by DigitalBridge Investment Management and IFM Investors for $11 billion cash, or $34.25 a share in an $11 billion all-cash deal, including debt. The transaction is expected to close in the second half of 2022.
Palantir Technologies reported adjusted Q1 EPS of 2 cents vs. views for flat profit of 4 cents. Revenue rose 31% to $446 million, the maker of data analytics software said, edging by estimates. The data analytics firm guided low on Q2 revenue. Shares plunged to a record low.
Coinbase, a cryptocurrency exchange, plunged to record lows after reporting first-quarter results that badly missed expectations. The company said crypto prices continued to fall through April. And in a filing, it warned of difficulties in protecting users' crypto funds if it goes bankrupt.
