Stock Stage Sharp Monday Afternoon Rally To Erase Morning Losses

Edward Kim  |

We're gambling on our vision. And we would rather do that than make "me too" products. Let some other companies do that.
 — Steve Jobs

Thirty-eight years ago, on Tuesday, January 24, 1984, Apple launched sales of its Macintosh personal computer.

The innovative new machine had been announced two days previously in a commercial directed by Ridley Scott that aired during Super Bowl XVIII, when the Los Angeles Raiders trounced the Washington Redskins 38-9.

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Video source: YouTube, Robert Cole

Despite being underpowered and overpriced — just a 7.8 MHz Motorola chip with a scant 128 kilobytes of RAM and a 9-inch monochrome screen with 512 x 342 resolution for an astonishing $2,500 — the Macintosh combined two features which set the standard for all future successful computers: a graphical user interface and a mouse.

The Macintosh had been in development at Apple for about 15 years, spearheaded by Jeff Raskin, a computer scientist and user interface specialist. Raskin’s work eventually caught the attention of Apple co-founder Steve Jobs.

Raskin and Jobs ultimately spent more time fighting than collaborating, and Raskin left Apple three years before his brainchild was commercially launched.

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Markets in Perspective, Jan. 24, 2022

After plummeting Monday morning to extend what had already been a four-day losing streak, equity markets made a stark reversal in the afternoon to finish in the green. 

Following a week that saw the major indexes shed between 4.6% and 7.6%, the start to the new week saw an accelerated decline, with the screen full of red numbers across the board to the tune of down 4% and more.

Stocks found their footing just after the noon hour and, by day’s end, had rallied to end their week-long losing streak. The S&P 500 finished up 0.3%, the Nasdaq Composite gained 0.6% and Dow Industrials rose 0.3%.

Small caps, which have been hit hardest in recent days, had the strongest rebound Monday with the Russell 2000 adding 2.3% after plunging 8.1% last week.

Set your alarms for Wednesday at 2pm

Jerome Powell and the Federal Reserve remain in the investor spotlight, as they have been solidly for months, since President Biden announced on Nov. 22, that Powell would remain Fed Chair for another term.

The Federal Open Market Committee meets this Tuesday and Wednesday, and the meeting will be followed as usual by an official statement at 2:00pm ET and a Powell press conference at 2:30pm ET.

Investors will be eager to see if Powell drops any hints of the extent of expected interest rate hikes, with many economists looking for at least three, if not four, rate increases this calendar year as inflation continues to be a macro and consumer concern.

We think the Fed will raise rates gradually this year, in 25 basis-point increments, as it has done in previous tightenings. It’s been over 20 years since the Fed made a larger move — the 50 basis-point hike in May 2000 — and Powell has not shown a penchant for willfully rattling markets.

Beyond the Fed, corporate earnings season continues in full swing, with several of the market’s largest companies reporting this week.

Key earnings reports expected this week

  • Tuesday: Microsoft (MSFT), J&J (JNJ), Verizon (VZ), Texas Instruments (TXN), American Express (AXP), General Electric (GE), Lockheed Martin (LMT), 3M (MMM)
  • Wednesday: Tesla (TSLA), Abbott Labs (ABT), Intel (INTC), AT&T (T), Boeing (BA)
  • Thursday: Apple (AAPL), Visa (V), Mastercard (MA), Comcast (CMCSA), McDonald’s (MCD), SAP (SAP)
  • Friday: Chevron (CVX), Charter (CHTR), Caterpillar (CAT), Colgate-Palmolive (CL), Phillips 66 (PSX)

Examining options market data provided by Tradier API, we saw prominent activity in Apple and Cleveland-Cliffs (CLF) among bull names. Apple is expected to report earnings after the close on Thursday, Jan. 27, with consensus at $1.89 for fiscal Q1 2022 EPS. After a stellar 2021 in which Cleveland-Cliffs gained nearly 50%, the steelmaker’s stock has tumbled 27% in just the past two weeks.

Among bear names, Tradier saw significant activity in Chewy (CHWY) and Lucid (LCID) options. Chewy stock is down nearly 58% in the last 12 months as revenue growth has slowed for the online pet supplies company. Lucid shares are down over 31% since their November peak. The stock has been part of the Nasdaq 100 since Dec. 20, 2021, which also marked the completion of Lucid's offering of over $2 billion in convertible senior notes. Those notes could serve as an effective near term dampener for the stock as traders arb against the convert.

Click to enlarge

Click to enlarge

Image source: Data by Tradier, chart by Equities News

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Source: Equities News

Stock price data is provided by IEX Cloud on a 15-minute delayed basis. Chart price data is provided by TradingView on a 15-minute delayed basis.

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