On Thursday, major US indices closed lower amid renewed selling of technology stocks. At the same time, investors believe that the end of quantitative easing, four rate hikes, and the beginning of the Fed’s balance sheet reduction for nine months – is so aggressive that it will limit the possibilities for further growth of stock indices. By the close of the session, the S&P 500 Index (US500) decreased by 1.4%, the Dow Jones Industrial Average (US30) decreased by 0.5%, and the Nasdaq Technology Index (US100) lost 2.5%.
During the previous week, the number of new jobless claims in the US was 230,000, while analysts expected 200,000. The US producer price index increased by 0.2% in December, which is lower than the expected 0.4% growth and much slower than the 1.0% growth in November. The decline in producer inflation is the first sign of the beginning of easing and consumer inflation in the near term.
Yesterday, Meta, formerly owned by Facebook, Google-Alphabet, Amazon, Apple, and Microsoft, fell sharply, with Microsoft shares down more than 4%.
Analysts believe the US Federal Reserve will raise rates by 25 basis points at its March 16 meeting, with rates rising 25 basis points each quarter through the third quarter of 2023.
Wells Fargo analysts also predict that the Federal Reserve will raise interest rates four times this year. The balance sheet reduction, according to the analysts, will begin in the 3rd quarter of 2023.
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The largest US banks (JPMorgan, Wells Fargo & Co, Citigroup, BlackRock, First Republic Bank) will report today. Analysts expect positive reports as 2021 was a successful year for the US economy.
Yesterday, Fed spokesman Evans said that inflation has been high for a longer period of time, so the Fed should act sooner. The committee needs to bring inflation down to about 2%. Evans also added that inflation was likely to be 2.5% by the end of this year.
Key points from Fed spokesman Brainard’s speech:
- We expect significant rate increases this year;
- We also expect our balance sheet to reduce;
- We are adjusting monetary policy to lower inflation;
- Labor shortages may be a long-term phenomenon;
- European stock indices traded without a single trend yesterday;
- . Germany’s DAX (DE30) gained 0.13%, Britain’s FTSE 100 (UK100) added 0.16% and Spain’s IBEX 35 increased by 0.53%;
- Meanwhile, the French CAC 40 index (FR40) decreased by 0.5%. Today a number of European countries will report on inflation.
Yesterday, British Tesco Plc shares decreased by 0.9% before today’s report. The largest British grocery retailer predicts that operating profit from retail operations for the fiscal year will be above the previously expected range of 2.5-2.6 billion pounds ($3.43-3.57 billion) on the background of good performance during the winter holidays.
The EU cannot ban the launch of Nord Stream 2, but the start is postponed due to the situation between Russia and Ukraine.
Asian stock indices are declining in trading on Friday, following the negative dynamics of US indices. Japan’s Nikkei (JP225) decreased by 1.28%, Hong Kong’s Hang Seng (HK50) decreased by 0.3%, and Australia’s ASX 200 (AU200) lost 1.08%. Statistics from China showed that China’s 2021 foreign trade surplus peaked at $676.43 billion, breaking the previous record of $593.9 billion in 2015. But month-to-month dynamics showed a slowdown in exports and imports. Analysts believe that strict restrictive measures to curb COVID-19 outbreaks and a real estate slump are two of the problems China will face in 2022 after an initial economic recovery.
Main market quotes:
S&P 500 (F) (US500) 4,659.03 −67.32 (−1.42%)
Dow Jones (US30) 36,113.62 −176.70 (−0.49%)
DAX (DE40) 16,031.59 +21.27 (+0.13%)
FTSE 100 (UK100) 7,563.85 +12.13 (+0.16%)
USD Index 94.87 −0.04 (−0.04%)
- – Japan Producer Price Index (q/q) at 01:50 (GMT+2);
- – UK GDP (m/m) at 09:00 (GMT+2);
- – UK Industrial Production (m/m) at 09:00 (GMT+2);
- – UK Manufacturing Production (m/m) at 09:00 (GMT+2);
- – ECB President Lagarde’s Speech at 15:30 (GMT+2);
- – US Retail Sales (m/m) at 15:30 (GMT+2);
- – US Industrial Production (m/m) at 16:15 (GMT+2);
- – US Michigan Consumer Sentiment (m/m) at 17:00 (GMT+2);
- – US FOMC Member Williams’s Speech at 18:00 (GMT+2).
This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.