Hey Folks we have kicked off 2022 in the worst fashion since 2008. Where to next? Get my take in this week’s round-up.
WEEKLY SOUND BITES:
Late gains helped US Indexes move higher for the week, but not before most major indexes moved temporarily into correction territory or down more than 10% from recent highs. The small-cap Russell 2000 Index lagged and ended the week down nearly 20% from its November peak, leaving it just outside of a bear market. Volatility also reached its highest level since the early months of the pandemic. Fears that the Fed might be “behind the curve” and forced to raise short-term interest rates quickly to tame inflation weighed heavily on sentiment and we got a view into their thinking during this past Wednesday’s FOMC Policy Statement and Press Conference. Fed Chair Jerome “Power Ranger Boom Boom” Powell left open the possibility that policymakers would raise rates in 2022 more than the three quarter-point hikes they had signaled after their December meeting, with the first increase coming in March. According to CME Group data, futures markets at the end of the week were pricing in a significant potential for at least 125 basis points (1.25%) of rate increases in 2022. “Boom Boom” Powell said that policymakers were only now discussing how a balance sheet reduction would work but that he expected to announce more details following the March meeting.
The US Commerce Department’s first estimate of economic growth in the fourth quarter showed GDP product rising at an annualized rate of 6.9%, well above consensus estimates of roughly 5.5%; for 2021, the economy grew by 5.7%, its fastest pace since 1984. The composite gauge of service and manufacturing activity fell to 50.8—barely in expansion territory, and its lowest level in 18 months—indicating that the economy had largely stalled as the rapidly spreading omicron variant of the coronavirus restrained consumers and exacerbated supply challenges. The University of Michigan’s gauge of consumer sentiment was revised lower to 67.2, its lowest level since November 2011, as Americans worried about inflation and falling real wages.
U.S. Treasury yields increased in response to the hawkish Fed signals, but our traders noted that the IHS Markit data may have helped temper the rise, along with the tensions between the U.S. and Russia.
Shares in Europe fell for a fourth consecutive week, extending declines on rising concerns about interest rate increases and escalating tensions between Russia and the West. Preliminary data for IHS Markit’s eurozone Purchasing Managers’ Index (PMI) came in at 52.4—an 11-month low but still a level that indicates an expansion in business activity.
Japan’s stock markets generated a negative return for the week as the BoJ Governor Haruhiko Kuroda reiterated the central bank’s commitment to ultra-loose monetary policy, which he expects to lead to an improvement in corporate profits and economic growth. Services sector activity fell sharply while manufacturers signaled strong improvement in operating conditions, as both output and new order growth quickened. The International Monetary Fund (IMF) revised upward its outlook for Japan’s economic growth in 2023 by 0.4 percentage points to 1.8% year over year.
Chinese stocks slumped ahead of a weeklong Lunar New Year holiday as teven more he debt crisis in China’s property sector has drawn attention as developers attempt to make or refinance loan payments.
Enjoy This Week’s Round-Up;
Don’t Be A Rat Brain Trader – Be the Red Stripe Zebra !!
Trade Smart !
hpb
