The Market News Reel for this week! Get the most important market news & updates for the week ahead! Major headlines, excerpts from news sources and a link to the full article are shown below. "Breaking Thoughts" section is purely our opinion.
The Fed Changes its Tune and Stocks Tumble in First Week
"Federal Reserve officials said a strengthening economy and higher inflation could lead to earlier and faster interest-rate increases than previously expected, with some policy makers also favoring starting to shrink the balance sheet soon after.
“Participants generally noted that, given their individual outlooks for the economy, the labor market, and inflation, it may become warranted to increase the federal funds rate sooner or at a faster pace than participants had earlier anticipated,” according to minutes published Wednesday of the Dec. 14-15 meeting of the U.S. central bank’s policy-setting Federal Open Market Committee, when it pivoted to a more aggressive inflation-fighting stance.
“Some participants also noted that it could be appropriate to begin to reduce the size of the Federal Reserve’s balance sheet relatively soon after beginning to raise the federal funds rate,” the minutes said.
The S&P 500 stock index extended declines following the release, falling 1.9 per cent at the close, the biggest loss since November. Yields on 10-year Treasuries rose to as high as 1.7087 per cent, a level last seen in April, and overnight swaps markets moved to price in an 80 per cent chance of a 25 basis-point hike at the Fed’s meeting in March.
At the conclusion of the December meeting, the FOMC announced it would wind down the Fed’s bond-buying program at a faster pace than first outlined at the previous meeting in early November, citing rising risks from inflation. The new schedule puts the central bank on track to conclude purchases in March." - read more on BNN Bloomberg here
Breaking Thoughts: Part of the turbulence in markets is due to the inconsistent and changing policies coming out of both the Fed and the Biden administration. In fact, they spent months insisting on the 2nd phase of "build back better" spending and that inflation was transitory, only to -in the last few weeks- change to fighting inflation with any means necessary. Their recent approval ratings are as low as 40%, which may partly explain why they change their policies and priorities week to week.
On the Fed side things are no better, as markets crave certainty. This week the Fed announced not just a faster ramp up of base interest rates than they had talked about only 2 weeks ago, but also also a reduction of their Balance Sheet in tandem with rate hikes. This is reverse QE while hiking rates, is the most hawkish the Fed has been since prior to the 2008 Financial crisis.
As a result stocks across the board -but especially growth/tech- have been selling off hard for days. Of course its rational if investors are responding to uncertainty, otherwise it has been the case that rates rising to moderate levels along with inflation are bullish for stocks. But at the same time, it is true that over the past few years value focused investors have been told "Don't fight the Fed" as low interest rates/high liquidity benefited growth strategies, perhaps now it's the growth investors that need to be told "Don't fight the Fed".
Major Earnings This Week
Monday January 10:
OrganiGram Holdings (OGI): Expected Q1 earnings of $-0.02 per share
Tilray (TLRY): Expected Q2 earnings of $-0.09 per share
Tuesday January 11:
Albertsons (ACI): Expected Q3 earnings of $0.59 per share
IHS Markit (INFO): Expected Q1 earnings of $0.83 per share
Wednesday January 12:
Infosys (INFY): Expected Q3 earnings of $0.18 per share
Jefferies Financial Group (JEF): Expected Q4 earnings of $1.31 per share
Shaw Communications (SJR): Expected Q1 earnings of $0.38 per share
Wipro (WIT): Expected Q3 earnings of $0.08 per share
Thursday January 13:
Delta Air Lines (DAL): Expected Q4 earnings of $0.11 per share
Taiwan Semiconductor Manufacturing (TSM): Expected Q4 earnings of $1.12 per share
Friday January 14:
Blackrock (BLK): Expected Q4 earnings of $10.05 per share
Citigroup (C): Expected Q4 earnings of $1.40 per share
JPMorgan Chase (JPM): Expected Q4 earnings of $3.00 per share
Wells Fargo (WFC): Expected Q4 earnings of $1.11 per share
Major IPOs Expected This Week
Thursday January 13:
Justworks (JW), an HR/Payroll platform seeks to raise up to $224M at a $2B valuation
TPG Partners (TPG), a Private Equity firm seeks to raise up to $878M at a $9.5B valuation
See you next week!
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