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.

Stocks fall as US yields rise

Markets fell on Tuesday.

The S&P 500 tumbled 1.8 percent while the STOXX Europe 600 fell 1.0 percent.

Stocks fell as the US 10-year Treasury yield hit a 2-year high, hovering around 1.87 percent on Tuesday.

“The bond market is continuing to price in a more aggressive policy tightening by Federal Reserve based on still-high inflation and the Fed’s more hawkish guidance,” said Kathy Bostjancic, the chief US financial market economist at Oxford Economics.

Meanwhile, Ryan Detrick of LPL Financial said that “the economy is indeed slowing due to omicron”, but added that “we expect any near-term slowdown of output to simply be pushed back to further quarters once the omicron worries subside”.

Indeed, the latest COVID-19 surge is showing signs of slowing in a handful of areas in the US hit earliest by the omicron variant, with New York, for example, seeing its seven-day average of daily new cases falling since hitting a record earlier this month.

Still, the World Health Organization on Tuesday said the pandemic will not end as the Omicron variant subsides in some countries.

“This pandemic is nowhere near over and with the incredible growth of omicron globally, new variants are likely to emerge, which is why tracking and assessment remain critical,” said WHO Director-General Tedros Adhanom Ghebreysus.

Markets rise, consumer prices jump, COVID-19 cases surge

Markets rose on Wednesday.

The S&P 500 rose 0.3 percent, the STOXX Europe 600 rose 0.7 percent and the Nikkei 225 surged 1.9 percent.

Stocks rose despite the US reporting that consumer prices rose 7 percent in December from the previous year, the biggest jump since 1982.

Investors also shrugged off news of the continuing surge in COVID-19 cases, with the US reporting a 73 percent jump in cases for the week through Sunday and the world as a whole seeing a 55 percent increase.

“This is off the charts,” said Maria Van Kerkhove, WHO’s technical lead on Covid-19. “The sheer volume of cases is putting a burden on health-care systems.”

Powell: “We’ll be normalizing policy”

Markets were mixed on Tuesday.

The S&P 500 rose 0.9 percent and the STOXX Europe 600 rose 0.8 percent. However, the Nikkei 225 fell 0.9 percent.

US investors shrugged off Federal Reserve Chairman Jerome Powell's declaration on Tuesday at his confirmation hearing that tighter monetary policy is likely this year.

“As we move through this year … if things develop as expected, we’ll be normalizing policy, meaning we’re going to end our asset purchases in March, meaning we’ll be raising rates over the course of the year,” he said.

Jeff Mills, chief investment officer at Bryn Mawr Trust Wealth Management, said that the gains in stocks on Tuesday is “just a reprieve from some pretty extreme selling we’ve had over the past number of weeks, really since the beginning of the year”.

Still, despite the risks from tighter monetary policy and rising COVID-19 infections, analysts do not see much downside for stocks.

Luca Paolini, chief strategist at Pictet Asset Management, said that “the economic recovery remains resilient nevertheless, which means stocks don’t appear particularly vulnerable to a correction”.

“There is likely to be a US stock market correction in the first half of 2022, but I expect a relatively swift recovery,” said Kristina Hooper, global market strategist at Invesco.

Economy to see “continued growth” but market faces “a lot of volatility”

Markets were mostly lower on Monday.

The S&P 500 fell 0.1 percent and the STOXX Europe 600 tumbled 1.5 percent. However, the Shanghai Composite rose 0.4 percent.

Expectations of higher interest rates kept markets under pressure, with Randy Frederick, director of trading and derivatives at Schwab Center for Financial Research, saying that “there’s like an 80% probability” that the Federal Reserve will raise interest rates in March.

Economic growth, though, is expected to be resilient, with Shannon Saccocia, CIO of Boston Private Wealth, saying that “from an economic standpoint we are looking at continued growth over the next several quarters”.

Similarly, JPMorgan Chase CEO and chairman Jamie Dimon told CNBC that while it is “possible that inflation is worse than they think and they raise rates more than people think”, the economy could see “the best growth we’ve ever had this year, I think since maybe sometime after the Great Depression”.

“The market is different,” Dimon said however. “We’re kind of expecting that the market will have a lot of volatility this year as rates go up and people kind of redo projections.”

Markets fall as Fed prepares to enter “uncharted waters”

Markets fell on Thursday.

The S&P 500 dipped 0.1 percent, the STOXX Europe 600 fell 1.3 percent and the Nikkei 225 plunged 2.9 percent.

Investors have been selling stocks amid concerns that the Federal Reserve will start hiking interest rates, cut the amount of bonds it buys each month and reduce its balance sheet.

DataTrek co-founder Nick Colas said in his daily note Wednesday evening that “these are truly uncharted waters”.

S&P 500 plunges as Fed considers shrinking its balance sheet

US stocks fell sharply on Wednesday, with the S&P 500 plunging 1.9 percent.

Elsewhere, markets were mixed. The STOXX Europe 600 rose 0.1 percent and the Nikkei 225 rose 0.1 percent. However, the Shanghai Composite fell 1.0 percent.

Investors in the US were spooked after the minutes of the last Federal Reserve monetary policy meeting released on Wednesday showed that the central bank has discussed reducing its balance sheet shortly after it raises rates later this year.

“If the Fed starts shrinking the balance sheet that’s going to be disastrous,” said Infrastructure Capital Management CEO Jay Hatfield.

European stocks, US COVID-19 infections break records

Markets were mixed on Tuesday.

The STOXX Europe 600 rose 0.8 percent to a record high but the S&P 500 dipped 0.1 percent.

US COVID-19 infections hit a record high of more than 1 million on Monday, driven by the Omicron variant.

However, JPMorgan equity strategists led by Mislav Matejka wrote on Tuesday that the “new variant is proving to be milder than the prior ones”.

“We believe there is further upside for stocks, despite a strong run so far,” they added.

Markets start 2022 on positive note

Markets rose on Monday.

The S&P 500 rose 0.6 percent to a record high on the first trading day of 2022. The STOXX Europe 600 rose 0.5 percent.

“We’re still in that modestly optimistic outlook for the year ahead and think the economy and corporate profits are set up to support rising equity prices, at least in the first part of the year,” said Tom Hainlin, global investment strategist at US Bank Wealth Management.

Investors shrugged off the continuing rise of COVID-19 cases, with Liz Young, SoFi’s head of investment strategy, suggesting that the Omicron wave could be over faster than those of earlier variants.

However, Young also said that “what we saw with this last wave is it impacted supply and not demand, which tells me that inflation is still here to stay for the first half of 2022”.

Markets mostly fall, China stocks look “attractive”

Markets were mostly lower on Friday.

The S&P 500 fell 0.3 percent and the STOXX Europe 600 fell 0.2 percent.

However, the Shanghai Composite rose 0.6 percent after China reported that its official manufacturing PMI rose to 50.3 in December from 50.1 in November.

Earlier this week, UBS Global Wealth Management’s regional chief investment officer Kelvin Tay told CNBC that Chinese stocks currently look “very, very attractive” after underperforming relative to European and US stocks.

However, Tay added that the Chinese market is unlikely to recover in the next three months due to a “distinct lack of catalysts”.