Stock Market Today: Earnings Help Stocks Muscle Higher Into the Close

Another slow-news session saw stocks rebound considerably from yesterday’s slippage – then dodge what was shaping up to be another afternoon swoon.

With little on the data front, most eyes were on the earnings calendar, which provided a few fireworks. Peloton Interactive (PTON, +25.3%), for instance, reported a quarterly loss and hacked down its full-year revenue guidance – but shares still surged as the fitness company announced it would slash nearly $800 million in annual costs, including cutting 2,800 jobs, and said it would replace CEO John Foley.

“We believe Foley leaving the CEO post and moving to executive chair (being replaced by former Spotify and Netflix CFO [Barry McCarthy]) sets up a fork in the road path for Peloton in the months ahead,” says Wedbush analyst Daniel Ives. “While Foley has supermajority B shares and ultimately controls the fate of Peloton, we believe shareholder pressure will build to solicit bids and sell Peloton to a strategic player with potential bidders Apple, Amazon, and Nike likely in the fold.”

That helped at least temporarily stanch more than a year of bleeding, though PTON shares remain off by 76% from their January 2021 highs.

Pfizer (PFE, -2.8%) declined on the back of a fourth-quarter revenue miss, though profits beat expectations by 24% and the company said it expects record revenues in 2022.

And shares of Amgen (AMGN, +7.8%) rocketed higher after the company gave a bullish very-long-term outlook, predicting adjusted profits would grow by high single digits to low double digits through 2030. The biotech stock also said it would buy back $6 billion in its own shares during Q1 2022.

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The mostly optimistic earnings news sent stocks higher early, but that has hardly been an accurate gauge of where they’d finish in this turbulent trading year.

“Over the last few weeks, the final hour of trade has been very volatile, and on multiple occasions we’ve seen the day’s gain/losses quickly evaporate,” says Michael Reinking, senior market strategist for the New York Stock Exchange.

Still, stocks managed to survive a brief afternoon downturn and finish near their highs for the day. The Dow Jones Industrial Average closed up 1.1% to 35,462, the S&P 500 improved by 0.8% to 4,521 and the Nasdaq Composite gained 1.3% to 14,194.

stock chart for 020822

Other news in the stock market today:

  • The small-cap Russell 2000 advanced 1.6% to 2,045.
  • U.S. crude futures slumped 2.2% to settle at $89.36 per barrel.
  • Gold futures edged up 0.3% to finish at $1,827.90 an ounce.
  • Bitcoin mustered a 0.1% gain to $44,224.36. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.) 
  • Fiserv (FISV) fell 6.0% after its quarterly results. In its fourth quarter, the fintech firm reported adjusted eanrings of $1.57 per share on $4.02 billion in revenue, up 21% and 11%, respectively, on a year-over-year basis. Analysts, meanwhile, were calling for earnings of $1.56 per share on $4.03 billion in sales. Susquehanna Financial Group analyst James Friedman maintained a Positive (Buy) rating on FISV after earnings. The company’s earnings call “sounded more constructive to us, with Clover maintaining hyper-growth, numerous new banks starting to board and continued improvement in Carat. At these depressed levels we think there is a lot of overlooked optionality in the FISV shares.
  • Harley-Davidson (HOG) was a big earnings winner, with the stock spiking 15.5% in the wake of its results. For its fourth quarter, the motorcycle company reported a profit of 14 cents per share compared to analysts’ consensus estimate for a per-share loss of 37 cents. HOG also said revenue rose 40% year-over-year to $1.02 billion. Analysts were expecting the company to report $663.84 million in sales.

Could Fed Rate Hikes Spark a Value Rally?

Markets’ herky-jerky start to 2022 might reasonably have many investors on their guard, but smoother sailing might be on the horizon.

Namely, one of the biggest drivers of volatility of late – worries about the Federal Reserve starting an aggressive bout of rate hikes this year – could be a boon, at least for certain parts of the market.

“While the commencement of a Fed hiking cycle has historically led to volatility in the equity markets, we find that sector selectivity and investible horizon remain key during these periods,” says Gargi Chaudhuri, head of iShares Investment Strategy, Americas. “While the average performance three months prior to the start of a rate hiking cycle can be muted, our research shows that performance in the 12 months following the start of the cycle can be meaningfully higher, especially in sectors that are more sensitive to rising rates such as financials, energy and overall value sectors of the market.”

That’s especially good news for new buyers of truly value-priced stocks from these and other sectors, as they not only offer attractive entry points at the moment – but in many cases, higher-than-average yields thanks to still-depressed prices.

Today, we’ve dug into seven dividend stocks that are trading well below their own historical averages and offer more income than the broader market. Check them out.

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