Stocks ticked lower this morning following yet another wild premarket trading session that saw sentiment flip several times. The tech-heavy Nasdaq Composite fell the most of the three major indexes opposite the Dow, which only endured slight losses. The S&P split the difference.
Big Tech, in particular, dropped after a strong showing yesterday. Nvidia (NASDAQ: NVDA), Apple (NASDAQ: AAPL), and Microsoft (NASDAQ: MSFT) all sunk roughly 1%. Meanwhile, bank stocks rallied alongside oil shares.
“We believe that once the FOMC starts to raise the federal funds rate and details the pace of running off the Fed’s balance sheet, the financial markets will learn to live with tightening monetary policy as long as it doesn’t risk causing a recession,” said Ed Yardeni, president of Yardeni Research.
Exxon Mobil (NYSE: XOM) skyrocketed today after the company reported a blowout Q4 before the market opened this morning. XOM boasted $8.87 billion in quarterly profits, marking its largest profit since 2014. Biden’s push for renewable energy last year ironically boosted margins tremendously for the integrated oil & gas industry. This came at a great cost to consumers, but for XOM, it was a major boon.
The company distributed $15 billion to shareholders in 2021 while reducing spending. What’s more, XOM wants to slash spending further. The company just announced yesterday that it plans on closing its corporate headquarters in Dallas. Additional “belt-tightening” maneuvers are expected as well.
But the big news for XOM shareholders was that the company announced a $10 billion stock buyback program, which was roughly the size of the company’s revenues beat last quarter. This drove XOM shares over 5.50% higher through noon as bulls collectively laughed in the face of Biden’s green energy agenda.
And though most US stocks didn’t enjoy a Q4 as strong as XOM’s, the company may be setting a precedent for the near future. Additional stock buybacks from other corporations seem likely over the next few weeks. Share prices are trading at major discounts relative to their recent highs, after all.
For any company holding excess cash, buybacks are a bit of a “no-brainer,” even with many Wall Street banks predicting a recession later this year.
Wells Fargo strategists, however, still think there’s a good chance that the US economy will avoid a major slowdown.
“The latest decline is a normal market correction that does not signal a recession or the end of this bull market,” explained Wells Fargo global equity strategist Chris Haverland.
“We continue to believe that economic growth and corporate earnings will be solid this year, and that the Fed will not be overly aggressive in dialing back monetary policy.”
Haverland is probably right in that the Fed won’t dial up the hawkishness like most Wall Street analysts think it will. That doesn’t mean, however, that the US economy’s going to be firing on all cylinders through Q3 and Q4. Persistent inflation pressures should make sure of that.
But in the short-term, the stage is certainly set for a major rip higher despite this morning’s struggles as more companies prepare to unleash massive buyback programs alongside XOM.
