Volatility in the stock markets continues as Monday's trading ranges were the largest we have witnessed for some time. The good news was after an almost 1000 point retreat, the Dow Jones Industrial Average finished up on the day. The impending Federal Reserve meeting this week and the rising likelihood of a Russian foray into Ukraine added to market tensions. Tuesday's markets continue to be volatile for much of the same reasons and we expect this will continue for some time. The January retreat also continues to be impacted by worries over inflation and rising bond yields which have exerted downward pressure on stock prices.
The Dow Jones Industrial Average slid 4.58%, while the Standard & Poor’s 500 sank 5.68%. The Nasdaq Composite index dropped 7.55% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, slipped 0.61%.1,2,3
Another Turbulent Week
After the holiday weekend, stocks found little respite from this month’s selling pressures. The week began with the 10-year Treasury yield hitting a two-year high that triggered a broad retreat in stocks, with technology and other high-growth companies bearing the brunt of the losses. The Nasdaq Composite officially entered correction territory and closed below its 200-day moving average for the first time since April 2020.4
Stocks struggled throughout the week, rallying in early trading on both Wednesday and Thursday on solid corporate earnings and stabilizing bond yields, only to end lower on late-day selling. While last year may have been distinguished by “buying on the dip,” this week reflected a different mindset, “selling on the rebound.” Stocks extended their losses in the final hours of the Friday trading session to conclude a difficult week.
Rate Hike Expectations Rise
Recent market volatility has stemmed predominantly from inflation concerns and how aggressive the Fed will be in fighting it. This reaction reflects the market's pricing of rate hike probabilities, and their estimation of the Fed's reaction.
Last week's interest rate futures suggested that investors expect four or five rate hikes this year, up from three to four the previous week. Markets are pricing a 32% probability of 4-5 rate hikes by December and a nearly 28% probability of 5-6 rate hikes by year-end. Of course, the Fed will act independently of the market, but it provides insight into the recent run-up in yields and continuing pressure on high-growth stock valuations.5,6
This Week: Key Economic Data
Monday: Purchasing Managers’ Index (PMI) Composite Flash.
Tuesday: Consumer Confidence.
Wednesday: New Home Sales. FOMC Announcement.
Thursday: Gross Domestic Product (GDP). Durable Goods Orders. Jobless Claims.
Friday: Consumer Sentiment.
Source: Econoday, January 21, 2022
This Week: Companies Reporting Earnings
Monday: International Business Machines (IBM).
Tuesday: Microsoft Corporation (MSFT), General Electric Company (GE), Verizon Communications, Inc. (VZ), Johnson & Johnson (JNJ), Lockheed Martin Corporation (LMT), Texas Instruments, Inc. (TXN), American Express Company (AXP), Capital One Financial Corporation (COF), Raytheon Technologies Corporation (RTX).
Wednesday: AT&T, Inc. (T), Intel Corporation (INTC), The Boeing Company (BA), Tesla, Inc. (TSLA), Abbott Laboratories (ABT), ServiceNow, Inc. (NOW), KimberlyClark Corporation (KMB), Norfolk Southern Corporation (NSC).
Thursday: Apple, Inc. (AAPL), Visa, Inc. (V), Mastercard, Inc. (MA), McDonald’s Corporation (MCD), Northrop Grumman Corporation (NOC), Blackstone, Inc. (BX), Southwest Airlines Co. (LUV), The SherwinWilliams Company (SHW), Mondelez International, Inc. (MDLZ).
Friday: Caterpillar, Inc. (CAT), Chevron Corporation (CVX), ColgatePalmolive Company (CL).
Source: Zacks, January 21, 2022
“Brass shines as fair to the ignorant as gold to the goldsmiths.”
– Elizabeth I
Planning on Starting a Business? Here Are Some Tax Tips You Need to Know
Whether you own your own company or want to start making some side income off a hobby, there are some important tax considerations to know:
* 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.gov7
Simple Salt Swaps
If you want to trim salt from your diet or lower your sodium intake, there are many small swaps you can make. Sure, ditching the chips and pretzels may help, but there is hidden sodium in many other foods. Here are some swaps you can make that are small enough to incorporate them into your daily diet:
Making just these two swaps will help reduce your sodium intake both at home and on the go.
Tip adapted from Harvard Medical School8
A woman sailed into the Bahamas with her boat on the 28th of April. She stayed in the Bahamas for three weeks and then left in April. How is this possible?
Last week’s riddle: How many times can you subtract the number 4 from 40? Answer: Once. After that, you will no longer be working with the number 40.
Burgundy and gold Hawaiian ti plant (Cordyline minalis) nestled in yellow, ginger, and blue palm fronds.
Footnotes and Sources
1. The Wall Street Journal, January 21, 2022
2. The Wall Street Journal, January 21, 2022
3. The Wall Street Journal, January 21, 2022
4. CNBC, January 17, 2022
5. The Wall Street Journal, January 18, 2022
6. CME, January 19, 2022
7. IRS.gov, September 13, 2021
8. Health.Harvard.edu, August 1, 2018
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Weekly Market Insights: Rate Hike Talk Sinks Stocks
January 24, 2022