More commotion in the bond markets sent equities off to a rocky start for the week – though what was shaping up to be a significant gashing turned out to be just a scrape.
The yield on the 10-year Treasury jumped yet again Monday, to as high as 1.808% after starting 2021 at 1.510%.
"While rates have been volatile throughout 2021, the 10-year has not reached this level since prior to the pandemic," says Lindsey Bell, chief money and markets strategist for Ally Invest. "Information received since the start of the new year is making the case for Mister Market that the Fed is going to raise rates and remove liquidity from the market at a faster pace than what was thought just over a week ago."
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Remember: The Federal Reserve's members have signaled expectations for at least three hikes to the central bank's benchmark interest rate in 2022. Kiplinger forecasts the Fed will raise rates four times, and over the weekend, Goldman Sachs predicted the same. JPMorgan Chase (JPM) CEO Jamie Dimon upped the ante Monday, saying "I'd personally be surprised if it was just four."
However, heavy selling pressure Monday morning mercifully relaxed into the afternoon as 10-year rates backed off their highs.
Fresh off its worst week in 11 months, the Nasdaq Composite dropped by as much as 2.7% at its nadir, to 14,530 – just about 80 points from official correction territory (a drop of 10% or more from a peak) – but managed to finish with a marginal gain to 14,942. The Dow Jones Industrial Average (-0.5% to 36,068) and S&P 500 (-0.1% to 4,670) closed down but well off their intraday lows.
Other news in the stock market today:
- The small-cap Russell 2000 slipped by 0.4% to 2,171.
- Gold futures posted a marginal gain, settling at $1,798.80 an ounce.
- U.S. crude oil futures slipped 0.9% to end at $78.23 per barrel.
- Bitcoin, which sat at $41,912.19 on Friday afternoon, dropped below $40,000 earlier in Monday's session but recovered to $41,714.45, a 0.5% decline. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
- Take-Two Interactive (TTWO) is upping its stake in the mobile video game world, announcing today that it is buying Farmville creator Zynga (ZNGA) for $12.7 billion in cash and stock. This works out to $9.68 per ZNGA share – a 61.3% premium to last Friday's close. "This strategic combination brings together our best-in-class console and PC franchises, with a market-leading, diversified mobile publishing platform that has a rich history of innovation and creativity," said Strauss Zelnick, CEO of Take-Two Interactive. "We believe that we will deliver significant value to both sets of stockholders, including $100 million of annual cost synergies within the first two years post-closing and at least $500 million of annual net bookings opportunities over time." The deal is expected to close by the end of the second quarter as long as it gets the green light from regulators and shareholders. ZNGA shares soared 40.7% on the news, while TTWO fell 13.1% – potentially creating an attractive entry point for investors looking to pick up one of the best communication services stocks for 2022 at a discount.
- Moderna (MRNA) was a rare splash of bright green today, jumping 9.3% after the biotech's CEO Stephane Bancel told CNBC's "Squawk Box" on Monday that the company is working on a COVID-19 booster that will target the omicron variant. Bancel said MRNA believes this will be the "best strategy for a potential booster for the fall of 2022" after discussions with various public health officials. This comes as the Centers for Disease Control and Prevention (CDC) said immunocompromised individuals are now eligible for a fourth vaccine dose, as detailed Monday in our free A Step Ahead newsletter.
Will Earnings Jolt the Market?
Interest rates might be dominating headlines now, but a new potential market mover kicks off later this week.
It's the unofficial start of the fourth-quarter earnings season – and while you can check out a schedule of major reports here, big names to watch include Delta Air Lines (DAL), Wells Fargo (WFC) and BlackRock (BLK), which we've previewed here.
According to FactSet, analysts' estimated earnings growth rate for S&P 500 companies in Q4 2021 is 21.7% – if achieved, that would be the fourth consecutive quarter that earnings growth has topped 20%, which should give investors something to look forward to.
"While there are real risks, expectations for continued hiring and spending will support growth in expected earnings," says Jeff Buchbinder, chief equity strategist for LPL Financial, who adds that despite the risks of continued volatility "higher rates have usually been associated with strong market performance" too.
Investors looking for ways to potentially buy on the dip during short-term volatility could consider Kiplinger picks for the year ahead – such as our top stocks for 2022 or our best exchange-traded funds (ETFs).
That said, if you have a greater thirst for risk, and a speculative portfolio allocation you can afford to lose, you might consider swinging for the fences – with the pros' help, anyway.
While Wall Street analysts typically don't make bombastic calls, they have identified a few stocks that they see, ahem, "going to the moon" over the next year or so. These 30 names in particular have consensus buy targets implying at least 100% returns – and in many cases, much more. But watch out: This is a volatile bunch.
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