In this week’s recap: Stocks sink on rate hike talk.
THE WEEK ON WALL STREET
Stocks extended their January retreat as worries over inflation and rising bond yields continued to exert downward pressure on prices.
The Dow Jones Industrial Average slid 4.58%, while the Standard & Poor’s 500 sank 5.68%. The Nasdaq Composite index dropped 7.55% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, slipped 0.61%.1,2,3
ANOTHER TURBULENT WEEK
After the holiday weekend, stocks found little respite from this month’s selling pressures. The week began with the 10-year Treasury yield hitting a two-year high that triggered a broad retreat in stocks, with technology and other high-growth companies bearing the brunt of the losses. The Nasdaq Composite officially entered correction territory and closed below its 200-day moving average for the first time since April 2020.4
Stocks struggled throughout the week, rallying in early trading on both Wednesday and Thursday on solid corporate earnings and stabilizing bond yields, only to end lower on late-day selling. While last year may have been distinguished by “buying on the dip,” this week reflected a different mindset, “selling on the rebound.” Stocks extended their losses in the final hours of the Friday trading session to conclude a difficult week.
RATE HIKE EXPECTATIONS RISE
Recent market volatility has stemmed predominantly from inflation concerns and how aggressive the Fed will be in fighting it. This reaction reflects the market’s pricing of rate hike probabilities, and their estimation of the Fed’s reaction.
Last week’s interest rate futures suggested that investors expect four or five rate hikes this year, up from three to four the previous week. Markets are pricing a 32% probability of 4-5 rate hikes by December and a nearly 28% probability of 5-6 rate hikes by year-end. Of course, the Fed will act independently of the market, but it provides insight into the recent run-up in yields and continuing pressure on high-growth stock valuations.5,6
TIP OF THE WEEK
If a major financial or life event is coming up on your calendar, talk to a financial professional about it now. See what ideas they may have about how to manage the event.
THE WEEK AHEAD: KEY ECONOMIC DATA
Monday: Purchasing Managers’ Index (PMI) Composite Flash.
Tuesday: Consumer Confidence.
Wednesday: New Home Sales. FOMC Announcement.
Thursday: Gross Domestic Product (GDP). Durable Goods Orders. Jobless Claims.
Friday: Consumer Sentiment.
Source: Econoday, January 21, 2022
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.
THE WEEK AHEAD: COMPANIES REPORTING EARNINGS
Monday: International Business Machines (IBM).
Tuesday: Microsoft Corporation (MSFT), General Electric Company (GE), Verizon Communications, Inc. (VZ), Johnson & Johnson (JNJ), Lockheed Martin Corporation (LMT), Texas Instruments, Inc. (TXN), American Express Company (AXP), Capital One Financial Corporation (COF), Raytheon Technologies Corporation (RTX).
Wednesday: AT&T, Inc. (T), Intel Corporation (INTC), The Boeing Company (BA), Tesla, Inc. (TSLA), Abbott Laboratories (ABT), ServiceNow, Inc. (NOW), KimberlyClark Corporation (KMB), Norfolk Southern Corporation (NSC).
Thursday: Apple, Inc. (AAPL), Visa, Inc. (V), Mastercard, Inc. (MA), McDonald’s Corporation (MCD), Northrop Grumman Corporation (NOC), Blackstone, Inc. (BX), Southwest Airlines Co. (LUV), The SherwinWilliams Company (SHW), Mondelez International, Inc. (MDLZ).
Friday: Caterpillar, Inc. (CAT), Chevron Corporation (CVX), ColgatePalmolive Company (CL).
Source: Zacks, January 21, 2022
QUOTE OF THE WEEK
“Brass shines as fair to the ignorant as gold to the goldsmiths.”
THE WEEKLY RIDDLE
A woman sailed into the Bahamas with her boat on the 28th of April. She stayed in the Bahamas for three weeks and then left in April. How is this possible?
LAST WEEK’S RIDDLE:
How many times can you subtract the number 4 from 40?
Once. After that, you will no longer be working with the number 40.
Greg R. Solis, AIF®
President and CEO
Bob Medler, CRPC®, CMFC®, AIF®
Wealth Advisor / Investment Analyst
Tiffany Valentine, CFP®
CERTIFIED FINANCIAL PLANNER™
Vice President | Director of Financial Planning
SOLIS WEALTH MANAGEMENT
78-075 Main Street
La Quinta, CA 92253
Office: (760) 771-3339
Fax: (760) 771-3181
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. The information herein has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested.
This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such.
All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results.
MarketingPro, Inc. is not affiliated with any person or firm that may be providing this information to you. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.
Copyright 2022 FMG Suite.
1. The Wall Street Journal, January 21, 2022
2. The Wall Street Journal, January 21, 2022
3. The Wall Street Journal, January 21, 2022
4. CNBC, January 17, 2022