Stocks Down Sharply Yesterday, Led By Declines In Tech And Energy  Image: Bigstock Stocks closed sharply lower yesterday with the tech-heavy Nasdaq leading the way, giving up -4.25%. The S&P was next with -3.20%. Exacerbating the losses was a pullback in energy. Strong energy stocks have helped the S&P avoid the steeper declines that we've seen in the Nasdaq. But yesterday's hit in energy stocks just magnified the S&P's drop. There wasn't any real new news triggering the selloff. But the old news of high inflation, and worries that the Fed will overcorrect on rates (i.e., raising too high and too fast after being asleep at the wheel all last year over inflation), was enough for investors to further reduce their risk. The market appears to be pricing in a worst-case scenario, which includes a recession. But, the economy is actually in better shape than the market is giving it credit for. That was underscored by last week's better than expected Employment report, which also kept the unemployment rate at near 50-year lows. And with literally millions more jobs available than there are unemployed people to fill them, it's likely to stay strong for quite some time. In addition to the strong jobs market, is a strong consumer, and strong businesses. Ironically enough, that was on full display in Q1's GDP report. Even though it showed a contraction of -1.4%, a closer look at the details showed that consumer spending was up 2.7% q/q, which was a faster growth rate than the previous quarter's 2.5%. Moreover, business investment was up 9.2%, residential investment was up 2.1%, and final sales to private domestic purchasers were up 3.7% vs. last quarter's 2.6%. (What tanked Q1 GDP numbers was lower government spending, lower exports, and lower inventories, as businesses built up supplies very slowly, in spite of surging demand. That's what weighed on the GDP numbers.) And that's why the current selloff (when you look past the headlines), could turn out to be a fantastic buying opportunity. No need to go all in at once. Taking nibbles on the way down is fine. But if you think the market is closer to the bottom than not, and you're expecting a turnaround, or at least a meaningful bounce, it could prove to be a great place to start adding, especially since stocks haven't been this low in over a year. In the meantime, earnings season continues. We'll get 446 companies reporting earnings today (1,421 total between today and Friday), and another 483 on deck for next week. See you tomorrow,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
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