Stocks continue to be under pressure today, after the long holiday weekend, as the reality of higher short terms rates takes hold. Currently, the two-year US Government bond is yielding over 1pct. If the Federal Reserves plan to raise interest rates three times each in 2022 and 2023 holds up, this rate looks to be headed even higher. Additionally, Microsoft announced a major deal with Activision Blizzard (ATVI) whose shares jumped in the pre-market after Microsoft (MSFT) announced it will acquire the video game publisher for $95 per share. The deal, valued at $68.7 billion is Microsoft's largest takeover ever. Meanwhile deteriorating investor enthusiasm for high-valuation growth companies and a mixed start to the fourth-quarter earnings season made for a volatile week.
The Dow Jones Industrial Average lost 0.88%, while the Standard & Poor’s 500 slipped 0.30%. The Nasdaq Composite index fell 0.28% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, gained 1.31%.1,2,3
Stocks were under pressure all week as investors grappled with higher bond yields and talk of possibly four rate hikes this year. Initially, intraday declines would bring out buyers and pare the losses. Investors were particularly heartened by Fed Chair Powell’s congressional testimony on Tuesday that softened the hawkish tone found in the minutes of the Federal Open Market Committee’s December meeting.
After digesting the hot inflation reports released mid-week, stocks were unable to resist the selling pressures on Thursday. A weak retail sales number, a resumption in the rise in yields, and mixed earnings from some of the big money center banks weighed on the market during Friday’s trading.
Inflation and the Fed
Inflation reports last week continued to reflect upward momentum in consumer prices. The Consumer Price Index posted a 7.0% year-over-year jump–the biggest increase since 1982, while the Producer Price Index rose 9.7% from a year earlier–the fastest pace since 2010 when the index was reconstituted.4,5
Markets responded calmly as both numbers were in the neighborhood of expectations and the monthly increase for each moderated from previous single-month increases. The price pressures are expected to remain in the face of continuing supply chain constraints and wage growth. The pace and persistence of price increases may influence the speed at which the Fed may tighten in the year ahead.
This Week: Key Economic Data
Wednesday: Housing Starts.
Thursday: Jobless Claims. Existing Home Sales.
Friday: Index of Economic Indicators.
Source: Econoday, January 14, 2022
This Week: Companies Reporting Earnings
Tuesday: The Goldman Sachs Group, Inc. (GS), The Charles Schwab Corporation (SCHW), J.B. Hunt Transport Services, Inc. (JBHT)
Wednesday: Bank of America (BAC), UnitedHealth Group, Inc. (UNH), The Procter & Gamble Company (PG), Morgan Stanley (MS)
Thursday: Netflix, Inc. (NFLX), CSX Corporation (CSX), Union Pacific Corporation (UNP), United Airlines Holdings, Inc. (UAL)
Friday: Schlumberger Limited (SLB).
Source: Zacks, January 14, 2022
“If we all worked on the assumption that what is accepted as true were really true, there would be little hope of advance.”
– Orville Wright
What to do if You Get Mail From the IRS
The IRS sends letters and notices for many different reasons. Some letters need a response or action item, while some are just notices to keep you informed.
Here’s what to do if you receive mail from the IRS:
* This information is not intended to be a substitute for specific, individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.
Tip adapted from IRS.gov6
A Stretch to Combat “Tech Neck”
We spend so much time staring at our phones and computers, it’s no wonder that so many of us are suffering from “tech neck,” or a muscle tightness at the back of the neck from looking down for multiple hours of the day.
Luckily, there are quite a few stretches you can do to combat tech neck. Here is one of our favorites:
This stretch is called the exaggerated nod. While sitting at your desk or standing comfortably, slowly look up to the ceiling with your mouth closed. Then, open and close your jaw to feel a stretch in the front of your neck. Repeat this for a few seconds.
After you look up, exaggerate your nod down by staring at your chest. This will help stretch out the back of your neck. Repeat these two stretches a few times to loosen up your tech neck.
Tip adapted from Healthline7
How many times can you subtract the number 4 from 40?
Last week’s riddle: I’m soft enough to soothe the skin, as well as make rocks crumble. I’m often slippery and on the move. What am I? Answer: Water.
Spirit Island, Jasper Alberta, Canada
Footnotes and Sources
1. The Wall Street Journal, January 14, 2022
2. The Wall Street Journal, January 14, 2022
3. The Wall Street Journal, January 14, 2022
4. The Wall Street Journal, January 12, 2022
5. CNBC, January 13, 2022
6. IRS, August 16, 2021
7. Healthline.com, September 30, 2021
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Weekly Market Insights: Fed: Rate Hikes Near
January 18, 2022