Market Outlook Feb 7th--->Feb 11th $SPY

7 בפבר׳ 2022

Breakdown of Each chart
Top left - S&P 500 / General market
Bottom left - QQQ / Nasdaq / Tech sector
Top right- XLF / Financial sector
Bottom right- Dollar index

Recap for last week.
Momentum from last Friday’s melt up in US equity markets carried over this week when US trading got under way. Oversold conditions coming out of a horrific January opened the door for a modest reawaking in growth stocks amid a likely heavy dose of short covering as the calendar turned to February. Investors debated whether the choppy, violent bounce in equities was anything more than a typical bear-market-type rally ahead of catalytic earnings reports and central bank meetings scheduled for later in the week. WTI crude oil prices continued to surge, surpassing the $90 mark after OPEC+ producers stayed the course regarding expected output increases at their February conclave. Also EU CPI figures remained stubbornly high, and ongoing hawkish Fed rhetoric kept investors on edge about the expect path of Federal Reserve tightening.

By midweek, risk assets, namely equities, came under some pressure after a few high-profile earnings duds combined with hawkish, overseas central bank commentary. Several BOE members dissented to Wednesday’s 25 basis point hike, wanting to see England’s central bank raise by a more aggressive 50 bps instead. Following that, the European Central clearly pivoted as ECB Chief Lagarde was unwilling to repeat the recent mantra that rates were “unlikely” to rise this year. The US dollar softened against both the Pound and the Euro. Rates moved up globally and spreads between Germany and the periphery widened. By the end of week the German BUND reached +20 basis points.

Trading remained very choppy into and after Friday’s January US employment report blew away depressed expectations on nearly all accounts brining focus squarely back onto the US Federal Reserve. The 5.7% y/y gain in hourly wages stuck out in particular. To this point, there has been little indication in the composition of the rise in CPI that wage pressures are passing directly through to prices, but that concern may now be increasingly on the Fed’s radar. The US 2-year Treasury yield jumped above 1.3% while futures markets saw the odds of a 50 bps hike at either the March or May FOMC meeting creep higher. The benchmark US 10-year yield moved back above 1.9%, levels not seen since late 2019 while EU rates continued to track higher. For the week, the S&P gained 1.6%, the DJIA was up 1%, and the Nasdaq added 2.4%.

In corporate news this week, earnings season entered its stride, with a slew of major tech companies reporting quarterly data. Facebook parent Meta’s shares saw a historic post-earnings drop this week, hitting their lowest since mid-2020, after issuing an ugly forecast amid pressure from competition and further fallout from iOS privacy changes. Google parent Alphabet posted a beat on its top and bottom line, as its ad revenue jumped 33% year on year to over 61B, and the tech giant announced a 20-for-1 stock split. PayPal shares hit a two-year low after cutting its user numbers outlook and cautioning that growth would be hit by supply chain pressures, inflation, and weakening e-commerce activity. Snap issued a beat on revenue, earnings, and user growth, sending shares up over 50%, recouping and then some earlier losses spurred on by the Facebook fallout earlier in the week. AMD reported a hot quarter, recording record revenue and forecasting a strong 2022, despite ongoing supply chain issues. Clorox posted an ugly miss on EPS and guidance, citing a challenging cost environment. AT&T dropped after confirming plans to cut its dividend following the spin-off of WarnerMedia.