US stocks surge, consumer prices jump

Markets were mixed on Friday.

The S&P 500 surged 2.4 percent and the Nikkei 225 jumped 2.1 percent but the STOXX Europe 600 fell 1.0 percent.

Investors in the US shrugged off a report showing that December’s core personal consumption expenditures price index rose 4.9 percent from a year earlier, the biggest increase since September 1983.

Chris Hussey, a managing director at Goldman Sachs, noted that “the Fed’s hawkish tilt received as-expected support from another high inflation print”.

Darrell Cronk, chief investment officer for wealth and investment management at Wells Fargo, warned that the “lows may not be in yet”.

Markets mixed, tightening cycle “poses clear risks”

Markets were mixed on Thursday.

The S&P 500 fell 0.5 percent, its second consecutive decline. It had traded in positive territory earlier in the session.

Elsewhere on Thursday, the Nikkei 225 plunged 3.1 percent but the STOXX Europe 600 rose 0.7 percent.

Markets remained volatile after the Federal Reserve indicated on Wednesday that the first interest rate hike since late 2018 could come as soon as March.

Some analysts expect rapid tightening from the Fed.

“This tightening cycle will be different,” said Dario Perkins, an economist at TS Lombard in London. “The authorities may want to hike interest rates much quicker this time around.”

BNP Paribas global chief economist Luigi Speranza also expects that “this time is different” and predicts six Fed hikes this year.

And the tightening trend is global, with South Africa, Hungary, Singapore and Chile having already started and the Bank of Canada signalling a rate increase in March.

Perkins said that “the authorities might need to tighten policy more forcefully than investors realize. This poses clear risks to the financial sector.”

Markets mixed, “broader risk-off brewing”

Markets were mixed on Tuesday.

The S&P 500 closed 1.2 percent lower but well off the session low. In Asia, the Shanghai Composite plunged 2.6 percent while the Nikkei 225 tumbled 1.7 percent.

However, the STOXX Europe 600 rose 0.7 percent.

Analysts remained cautious.

“I don’t think it’s done,” said Liz Young, head of investment strategy at SoFi.

Barclays’ Maneesh Deshpande said that “signs of a broader risk-off are brewing”.

John Kicklighter at DailyFX warned that volatility is dangerous.

“If volatility does not settle in the upcoming session in observation of the impending FOMC event risk – what is supposed to be the top fundamental theme and event risk – I would consider this market severely unstable and prone to an ‘accident’ in collective sentiment,” he wrote.

S&P 500 recovers after early decline

Markets were mixed on Monday.

The STOXX Europe 600 plunged 3.8 percent but the S&P 500 recovered from an early sharp loss to close 0.3 percent higher.

JPMorgan stock strategist Marko Kolanovic said in a note Monday that the “recent pullback in risk assets appears overdone” and suggested that “we could be in the final stages of this correction”.

However, Morgan Stanley’s Mike Wilson said that a tightening Federal Reserve and slowing growth mean that the S&P 500 is vulnerable to a 10 percent plunge despite Monday’s late recovery.

“This type of action is just not comforting,” he said on CNBC.

Markets mixed, economy “solid”, higher rates “very likely”

Markets were mixed on Thursday.

The Nikkei 225 jumped 1.1 percent and the STOXX Europe 600 rose 0.5 percent. However, the S&P 500 fell 1.1 percent.

“With rate hikes coming and the historically volatile midterm year on the horizon, more violent ups and downs could be in store for investors this year,” said Ryan Detrick of LPL Financial.

However, Detrick added that “we are looking at another solid quarter from corporate America” and that “the underpinnings of the economy remain quite solid”.

Rodrigo Catril, senior FX strategist at National Australia Bank, wrote in a Thursday note that “the economic backdrop is still pointing to an increase in inflationary pressures and resilient growth, pointing to the need for the Fed as well as other central banks to shift towards a tighter policy setting, thus higher global rates over 2022 still look very likely”.

Nasdaq closes in correction territory

Markets mostly fell on Wednesday.

In the US, the S&P 500 fell 1.0 percent while the Nasdaq fell 1.1 percent into correction territory after having fallen 10.7 percent from its most recent record close in November 2021.

Elsewhere, the Nikkei 225 plunged 2.8 percent but the STOXX Europe 600 rose 0.2 percent.

“Investors worry that higher rates and tighter financial conditions will lead to valuation compression, in effect undoing much of the Fed’s decade-long largesse,” said Jack Ablin, Cresset Capital founding partner and CIO.