Wall Street shakes off a midday slump and ends higher
Stocks indexes bounced back from a midday slump on Wall Street to finish higher Monday, adding to the market’s recent winning streak despite lingering worries about the resilience of the global economy amid surging inflation and geopolitical tensions.
The S&P 500 rose 0.7% after being down as much as 0.6%. The Dow Jones Industrial Average eked out a 0.3% gain after having been in the red much of the day, while the Nasdaq composite climbed from a 0.5% deficit to close 1.3% higher. The indexes were coming off two straight weekly gains.
Trading has remained choppy, even through the market’s recent run of gains, as investors try to gauge what’s next for inflation and the global economy as the repercussions of Russia’s invasion of Ukraine continue to play out.
The benchmark S&P 500 posted a 1.8% gain last week and a 6.2% rise the previous week. It’s also up eight of the last 10 trading days, which is “pretty impressive,” said Randy Frederick, vice president of trading & derivatives at Charles Schwab.
Frederick said many investors may have reached a point of “panic exhaustion,” which could explain the market’s recent gains. Plus, he notes, apart from inflation, economic fundamentals look good, including a strong labor market and consumer spending.
“People complain about inflation, but they’re still spending and they’re still traveling,” he said.
The S&P 500 rose 32.46 points to 4,575.52. The index is now down 4% for the year. The Dow gained 94.65 points to 34,995.89, while the Nasdaq rose 185.60 points to 14,354.90.
Smaller company stocks were little changed. The Russell 2000 index inched up 0.08 points, or less than 0.1%, to 2,078.06.
Technology stocks helped power much of the comeback in the benchmark S&P 500 along with retailers, cruise lines and other companies that rely on consumer spending. Microsoft rose 2.3% and Tesla vaulted 8% for the biggest gain in the index.
Those gains outweighed a pullback in other sectors, including banks, which fell as bond yields eased lower, and energy stocks, which lost ground as crude oil prices closed sharply lower. Citigroup fell 1.4% and Exxon Mobile slid 2.8%.
U.S. crude oil slumped 7% and Brent crude, the international standard, fell 6.8%. The drop followed news that China began its most extensive coronavirus lockdown in two years to conduct mass testing and control a growing outbreak in Shanghai. That could put a dent in global demand for energy.
Oil prices remain volatile amid the backdrop of Russia’s invasion of Ukraine. The United Arab Emirates’ energy minister doubled down Monday on an oil alliance with Russia, saying that nation, with its 10 million barrels of oil a day, is an important member of the global OPEC+ energy alliance.
Ukraine and Russia are due to hold talks early this week in Turkey.
Oil prices are up about 40% globally over concerns about tighter supplies as demand remains strong. Higher oil prices are also raising concerns that already persistently high inflation could be worsened, further threatening global economic growth.
Markets in Europe closed mostly higher, while markets in Asia ended mixed.
Russian shares slumped as its stock market resumed trading of all companies after a monthlong halt following the invasion of Ukraine. The last full trading session in Moscow was on Feb. 25, a day after the index tumbled by a third after President Vladimir Putin ordered the invasion.
Bond yields eased back after shooting higher this month. The yield on the 10-year Treasury fell to 2.46% from 2.49% late Friday. Bond yields have been rising as Wall Street prepares for higher interest rates. The Federal Reserve has already announced a 0.25% hike of its key benchmark interest rate and is prepared to continue raising rates to help temper the impacts of rising inflation.
Investors will get more updates this week on just how much inflation is hurting consumers and businesses. The Conference Board will release its consumer confidence index for March on Tuesday. The Commerce Department will release its February report for personal income and spending on Thursday and the Labor Department will release its employment report for March on Friday.
Company-specific news helped lift several stocks on an otherwise quiet day as the latest quarter nears its close and Wall Street prepares for the next round of corporate earnings. Tesla’s big stock price jump came after the electric car maker said it is considering another stock split. Plantronics jumped 52.6% after HP said it will buy the headset maker.
Tesla seeks 2nd stock split in less than two years
NEW YORK | Shares of Tesla jumped at the opening bell Monday after the electric car maker announced its second stock split in less than two years.
The company said in a regulatory filing, and also in a tweet, that it plans to make a request at an upcoming annual shareholders meeting to increase its number of authorized shares so that it can split the stock in the form of a dividend.
It did not say when a split would occur or the ratio of such a stock split, but it would follow similar maneuvers by a trio of tech companies that have seen their shares soar in recent months.
Tesla’s shares are up more than 60% over the past year, with each costing more than $1,000.
And the company is growing. CEO Elon Musk opened Tesla’s first European factory last week, a “ Gigafactory “ in Germany that will employ 12,000 people and produce 500,000 vehicles a year.
“Given the stock’s meteoric run its not a surprise that Musk & Co. are heading down the path of another stock split especially with robust EV demand and the build-outs of the flagship Berlin and Austin Giga factories now on a glide path, said Dan Ives, who follows Tesla for Wedbush.
A stock split does would change the price-per-stock, but not the overall value of those holdings. It can push up the price of a company’s stock, at least temporarily, and the announcement did just that on Monday.
Shares continued to rise after the opening bell, almost 8%, or $77.22, to $1,087.86.
Tesla Inc. said that its board has greenlighted the proposal, but that the dividend is contingent on final board approval.
Tesla had a 5-for-1 stock split in August 2020, which went into effect one day after the company announced that it planned to sell up to $5 billion worth of its stock. Just three months later Tesla said that it was planning another stock sale, looking to raise up to $5 billion in that offering.
Tesla follows other tech giants that have seen the price of shares vault out of reach of most investors. Alphabet, Google’s parent company, announced a 20-for-1 split in February Amazon.com Inc. said this month that it would do a split of the same ratio.
“We view Tesla’s move following the likes of Amazon, Google, Apple and initiating its second stock split in two years as a smart strategic move that will be a positive catalyst for shares going forward,” Ives wrote in a research report.
In a filing with the Securities and Exchange Commission, Tesla said it would include more information, including the date and place of its annual shareholder meeting, in an upcoming proxy statement.
Walmart to end cigarette sales in some stores
NEW YORK | Walmart will no longer sell cigarettes in some of its stores though tobacco sales can be a significant revenue generator.
Wall Street Journal was the first to report the development Monday. It noted some stores in California, Florida, Arkansas and New Mexico were on the list, citing anonymous sources and store visits.
Walmart is not the first national retail chain to cut off cigarette sales even on a trial basis, but it is the largest.
Target ended cigarette sales in 1996 and the drugstore chain CVS Health did the same in 2014.
CVS Health sales in areas outside the pharmacy fell for a few quarters after it pulled tobacco products, and the company had predicted that missing tobacco products would hurt annual earnings by 7 to 8 cents per share.
Overall revenue has grown every year at CVS, however, after a number of acquisitions and changes to its stores bolstered the company’s health care offerings. CVS Health bought the health insurer Aetna in 2017.
Decisions about removing cigarettes at Walmart will be made on a store-by-store basis according to the business and particular market, the company said Monday.
“We are always looking at ways to meet our customers’ needs while still operating an efficient business,” Walmart said in a prepared statement.
Health officials say that cigarette smoking causes about one of every five deaths in the U.S. each year.
Walmart Inc., based in Bentonville, Arkansas, announced in 2019 that it was getting out of the vaping business and would stop selling electronic cigarettes at its stores and also at Sam’s Clubs. It said at the time the decision was based on “growing federal, state and local regulatory complexity.”