Traders on the NYSE floor, January 26, 2022.
Source: NYSE
After January’s surprisingly strong jobs report, focus on next week’s consumer inflation and what it means for the Federal Reserve’s plan to raise interest rates.
Friday reported 467,000 jobs added in January confused Wall Street economists, some of them expect a negative number due to the impact of the Covid omicron variation on the workforce. The report is also impressive in other ways. Payrolls were also revised higher with 709,000 jobs in November and December, and wages rose at a 5.7% year-on-year rate in January.
“People go back to playing the leapfrog game to see if they can figure out what the Fed is going to do, while the Fed may not even know,” said Art Hogan, chief market strategist at National Securities. self”. Futures traders begin to set prices in six rate hikes for this year, while many economists predict four or five.
The consumer price index is reported on Thursday and the University of Michigan’s survey of consumer sentiment is released on Friday. There are also dozens of earnings in the coming week, including pharmaceutical names Pfizer and Amgen. Walt Disney reports as well as consumer staples such as Coca-Cola, PepsiCo and Kellogg.
“We could get some sequential improvements in inflation,” Hogan said. “You start looking at the CPI month by month … there could be a movement in the right direction.” He said key inflation is expected to rise 0.4%, down from 0.5% in December. But that would still be a hot 7.2% year-over-year.
“Maybe a move in inflation in the right direction would be welcome. I think it might lose a bit of its hawkish tone on the street,” he said.
Despite soaring bond yields, stocks ended Friday with gains for the week. Massive swings have highlighted trading over the past week and some individual names have seen strong volatility. Meta . Platform down more than 26% in one day on Disappointing incomeand PayPal also lost almost 25% in a single session after issuing weak instructions. Amazon rose 13.5% on the Friday after its earnings.
Julian Emanuel, senior managing director and head of equity, derivatives and quantitative strategy group at Evercore ISI, said this type of private name volatility highlights the risk to investors in bulls. Top tech leaders are among the biggest names in S&P 500.
“It’s hard for investors who have only made money for 15 years in a row by owning growth stocks to change their view of the world. The volatility we’ve seen around one’s earnings. This number of names is not surprising, but it is aggravated in an economy that is likely to grow north of 4%,” he said.
Emanuel expects value and cyclical stocks to outperform growth names in an inflationary environment where central banks are raising interest rates.
The S&P 500 up 1.5% over the past week to close at 4,500, an important technical level. The Dow increased by 1% and Nasdaq was up 2.4% for the week. Nasdaq is currently 13% below its all-time high.
Energy was the week’s best, up nearly 5%, followed by consumer discretionary stocks, up just under 4%. Finance is up 3.5% and technology is up about 1%.
More volatility
The market could continue to fluctuate next week. Yields have seen a big move towards hawkish comments from European and UK central banks over the past week. The move was extended even further, following Friday’s jobs report.
“We expect continued volatility, which we have seen in individual stocks over the last week, possibly up and down, all in the run up to the key meeting,” said Mr. FOMC March 15th,” said Emanuel.
America 10 year yield, which affects mortgages and other loans, jumped as high as 1.93% on Friday.
Luke Tilley, chief economist at the Wilmington Trust, said he doesn’t expect the Federal Reserve to be as drastic in raising interest rates as markets are forecasting. He also expects inflation to peak and begin to decline.
“As we get to March, April, May, we get to the point where the underlying effects reduce the annual numbers,” he said.
Tilley expects the first increase of a quarter in March with three others this year.
Week-by-week calendar
Monday
Income: AmgenHasbro, Energizer, Tyson Foods, Take-Two Interactive, ON Semiconductor, Simon Property Group, Tenet Healthcare, Rambus, Leggett & Platt, Chegg, Nuance Communications
3:00pm Consumer Credit
Tuesday
Income: Pfizer, Chipotle, SoftBank, BP, DuPont, Lyft, Peloton InteractiveYum China, BNP Paribas, Aramark, Carrier Global, Coty, Thomson Reutersmasco, S&P Global, Warner Music, Centene, Willis Towers Watson, Edgewell Personal Care, Sysco, Harley-Davidson, KKR, Valvoline, Assurant, Spirit Airlines, Plantronics, Virtu Financial
6:00am survey NFIB
8:30 a.m. International Trade
Wednesday
Income: Walt Disney, CVS Health, Mattel, GlaxoSmithKline, Yum Brands, Uber Technologies, MGM Resorts, Fox Corp, Canopy Group, Penske Auto Group, CME Group, Reynolds . Consumer ProductsMesa Air, Copa Holdings, Bunge, Lumen Technology, Molina Healthcare, Zynga, Frontier Group, CDW, Honda, Toyota, Equinor
10:00 am Wholesale trade
10:30 a.m. Fed Governor Michelle Bowman
12:00 noon Cleveland Fed President Loretta Mester
Thursday
Income: Coca-Cola, PepsiCo, Expedia, Credit Suisse, AstraZeneca, Twitter, Kellogg, DaVita, Eventbrite, Zillow, Affirm Holdings, Hold on dad, VeriSign, Western Union, Yelp, Terex, Mohawk IndustriesEquitable Holdings, CyberArk Software, PG&E, Arcelor Mittal, Datadog, Martin Marietta Materials, Duke Energy, Unilever
8:30 a.m. Initial Jobless Claims
8:30am CPI
2:00 p.m. Federal Budget
Friday
Income: Under armour, British American Tobacco, AllianceBernteinBrand Newell, Apollo Global Management, Cleveland-Cliffs
10:00 am Consumer sentiment
