Stocks' Rout Continues as Rates and Russia Rattle Investors

Stocks swooned as monetary policy, geopolitics, and corporate earnings stoked fears, again rattling investors, who scurried for safer investments.

The Nasdaq is down more than 300 points, while the Dow Jones Industrial Average (DJIA) is close to 300 points lower. The CBOE Volatility Index (VIX)—the so-called "fear index"—climbed higher, continuing a steep ascent that began with the new year.

Concerns that sent major averages lower yesterday—before markets reversed and roared back to finish the day higher—are back today: rising interest rates as the Fed begins its two-day meeting, and the possibility of a Russian invasion of Ukraine.

Investors are also weighing a mixed bag of earnings news. General Electric Company (GE) is one of the worst-performing stock on the S&P 500 after its sales fell short of estimates. However, shares of International Business Machines Corporation (IBM) and American Express Company (AXP) are gaining after their better-than-expected numbers.

Tech stocks are falling. Shares of Microsoft Corporation (MSFT) are declining 3% ahead of the company's earnings release later today. Shares of the other FAAMG stocks are down more than 2%.  

Energy company stocks are gaining, with oil futures rebounding from their recent decline. Oil is now trading above $84 per barrel. The yield on the 10-year Treasury note is up to 1.75%. Gold rose, and the dollar gained against the euro. 

The rally in cryptocurrencies continues, with the price of both Bitcoin (BTC) and Ether (ETH) higher by about 8%.

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Housing Heights: Chart of the Day

U.S. home prices continued their climb in November, although at a slower pace than the month before. The S&P CoreLogic Case-Shiller Index rose at an annual rate of 18.8% in November, less than the 19% advance in October, although above economists' estimates. Year-over-year gains for both the 10-city composite and 20-city composite indexes were lower than the month before as well.

Phoenix had the biggest increase for the 30th month in a row, with prices higher by 32.2% from 2020. Tampa (+29%) and Miami (+26.6%) followed in second and third place, as they did in October.  

Craig J. Lazzara, managing director at S&P DJI, noted that, while home price growth is decelerating, the rise was the sixth highest in the 34 years of the index. He pointed out the five highest jumps were in the months immediately preceding November.

Lazzara said that it's still unclear if the strength of the housing market is being driven in part by a change in Americans' location preferences because of the COVID-19 pandemic or if it represents a permanent secular shift. He also noted that mortgage rates are rising, and we should soon be seeing the impact of that on home prices.

American Express: Stock of the Day

American Express shares are rising after it said members spent at "record levels" in the fourth quarter, sending its sales up 30% from the year earlier. The company reported total revenue net of interest expense of $12.1 billion in the period, with earnings per share (EPS) of $2.18. Both were above analysts' forecasts. American Express also indicated that it would raise its quarterly dividend to $0.52 from $0.43 per share beginning this quarter, pending board approval.

CEO Stephen J. Squeri explained that, along with higher consumer spending, the company maintained customer retention and satisfaction above pre-pandemic levels, increased new card acquisitions and loan balances, and boosted its digital presence. 

The CEO indicated that American Express expects sales growth for 2022 to be in the 18% to 20% range, with EPS of $9.25 to $9.65. Squeri added that, in the long term, as the economy reaches "a steady state," the company is targeting revenue growth in excess of 10% and EPS gains in the mid-teens percentages.

 Shares of American Express are up 7% on Jan. 25 and have gained 36% in the past year.