Weekly Market Update 01/15/2022
by Justin J. Long CFP®, on Jan 15, 2022
Our very own Las Vegas Raiders have made the playoffs for the 2021-2022 NFL season. LVMPD gave them a great send off on the strip yesterday before their flight to Cincinnati to play the Bengals this afternoon.
In other sports news, it was announced this week that Big League Weekend will host the Arizona Diamondbacks and the Colorado Rockies at Las Vegas Ballpark, home of the Aviators.
On a personal note, we are halfway through the five-day pause from CCSD with our two sons. As always, we hope everyone is staying safe and healthy.
And now on to the recap of this week:
Watch this week's update
Week in Review: Buyers lack conviction
The stock market closed lower this week, as investors faded a half-hearted rebound bid during the week. The S&P 500 and Nasdaq Composite both declined 0.3%, while the Dow Jones Industrial Average (-0.9%) and Russell 2000 (-0.8%) declined nearly 1.0%.
Nine of the 11 S&P 500 sectors finished in the red, including consumer discretionary (-1.5%), real estate (-2.0%), and utilities (-1.4%) with noticeable declines, while the energy (+5.2%) and communication services (+0.5%) sectors closed higher. Energy stocks followed oil prices ($83.87, +4.93, +6.3%) much higher.
The 10-yr yield wasn't the problem this week since it was unchanged at 1.77%. It was more that the market remained concerned about the Fed's tightening plans, the still-elevated valuations of growth stocks, weakening technical factors, and the disappointing start to the Q4 earnings-reporting season.
Fed Chair Powell, Fed Vice Chair nominee Lael Brainard, and a host of other Fed officials made it clear this week that they support tightening policy in part to keep inflation in check. Mr. Powell said in his confirmation hearing that he thinks the Fed will end asset purchases in March, hike rates over the course of the year, and allow the balance sheet to run off later in the year.
The 2-yr yield, which tracks expectations for the fed funds, rate increased nine basis points to 0.96%. The probability for the first rate hike to be in March increased to 86.1% from 75.9% last Friday, according to the CME FedWatch Tool.
The latest inflation data bolstered these expectations, even though the headline CPI and PPI prints for December decelerated on a month-over-month basis. That was largely due to the sharp decline in oil prices, which have since recovered. The core readings, which exclude food and energy, were hotter than expected.
As for earnings, JPMorgan Chase (JPM), Citigroup (C), and BlackRock (BLK) fell sharply following their earnings reports on Friday, but Wells Fargo (WFC) pleased shareholders with its report.
Other considerations included the S&P 500 closing below its 50-day moving average (4681), inviting the potential for follow-through selling; downside guidance from Sherwin-Williams (SHW), raising concerns about margin pressures; and the breakdown in negotiations surrounding the Build Back Better Act.
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As always, it is my pleasure to bring you this weekly update. If this or anything else is causing you pause or you would like further details, please feel free to reach out to me and we can schedule some time to chat.
Justin J. Long CFP®
Diazo Wealth Group
Upcoming Economic Calendar
Source: 1. FactSet
Source: Week in perspective provided by Briefing.com. Briefing.com offers live market analysis on their web site www.Briefing.com.
The data provided is for informational purposes only and is not an endorsement of any security, mutual fund, sector, or index. The information contained here is not guaranteed as to accuracy or completeness. All economic and performance information is historical and does not guarantee future results.
The Dow Jones Industrial Average is a price-weighted index comprising 30 widely traded blue chip U.S. common stocks. The NASDAQ Composite Index is a market-value-weighted index of all common stocks listed on the NASDAQ stock exchange. The S&P 500 Index tracks the performance of 500 of the largest publicly traded companies in the United States. The MSCI Europe, Australasia, and Far East (EAFE) Index tracks the performance of publicly traded large- and mid-cap stocks of companies in those regions. The Cboe Volatility Index (VIX) shows the market’s expectation of 30-day volatility and is constructed using the implied volatilities of a wide range of S&P 500 Index options. Weekly and year-to-date figures for the VIX show percentage changes, not investment returns. The Russell 2000 Index tracks the performance of approximately 2,000 publicly traded small-cap companies in the United States. It is not possible to invest directly in an index.
The Treasury yield curve is derived from available U.S. Treasury securities trading in the market and is provided directly by the U.S. Federal Reserve. The spread measures the difference in yield between two government securities. A normal (positive) yield curve occurs when longer-term rates are higher than shorter-term rates. The opposite holds true for an inverted yield curve. Year-to-date changes in U.S. Treasury bond yields are shown in basis points (bps). One hundred basis points equals one percent.
Oil prices are represented by West Texas Intermediate (WTI) crude oil.
The G20 countries comprise a mix of the world’s largest advanced and emerging economies, representing about two-thirds of the world’s population, 85% of global gross domestic product, and over 75% of global trade.
Innovative Adviser Solutions, LLC, a registered investment adviser, dba Diazo Wealth