The Skeptical Speculator

US stocks surge, consumer prices jump

2022-01-29T09:34:00.003+08:00

Markets were mixed on Friday.

The S&P 500 surged 2.4 percent and the Nikkei 225 jumped 2.1 percent but the STOXX Europe 600 fell 1.0 percent.

Investors in the US shrugged off a report showing that December’s core personal consumption expenditures price index rose 4.9 percent from a year earlier, the biggest increase since September 1983.

Chris Hussey, a managing director at Goldman Sachs, noted that “the Fed’s hawkish tilt received as-expected support from another high inflation print”.

Darrell Cronk, chief investment officer for wealth and investment management at Wells Fargo, warned that the “lows may not be in yet”.

Markets mixed, tightening cycle “poses clear risks”

2022-01-28T09:07:00.005+08:00

Markets were mixed on Thursday.

The S&P 500 fell 0.5 percent, its second consecutive decline. It had traded in positive territory earlier in the session.

Elsewhere on Thursday, the Nikkei 225 plunged 3.1 percent but the STOXX Europe 600 rose 0.7 percent.

Markets remained volatile after the Federal Reserve indicated on Wednesday that the first interest rate hike since late 2018 could come as soon as March.

Some analysts expect rapid tightening from the Fed.

“This tightening cycle will be different,” said Dario Perkins, an economist at TS Lombard in London. “The authorities may want to hike interest rates much quicker this time around.”

BNP Paribas global chief economist Luigi Speranza also expects that “this time is different” and predicts six Fed hikes this year.

And the tightening trend is global, with South Africa, Hungary, Singapore and Chile having already started and the Bank of Canada signalling a rate increase in March.

Perkins said that “the authorities might need to tighten policy more forcefully than investors realize. This poses clear risks to the financial sector.”

Markets mixed, “broader risk-off brewing”

2022-01-26T09:33:00.000+08:00

Markets were mixed on Tuesday.

The S&P 500 closed 1.2 percent lower but well off the session low. In Asia, the Shanghai Composite plunged 2.6 percent while the Nikkei 225 tumbled 1.7 percent.

However, the STOXX Europe 600 rose 0.7 percent.

Analysts remained cautious.

“I don’t think it’s done,” said Liz Young, head of investment strategy at SoFi.

Barclays’ Maneesh Deshpande said that “signs of a broader risk-off are brewing”.

John Kicklighter at DailyFX warned that volatility is dangerous.

“If volatility does not settle in the upcoming session in observation of the impending FOMC event risk – what is supposed to be the top fundamental theme and event risk – I would consider this market severely unstable and prone to an ‘accident’ in collective sentiment,” he wrote.

S&P 500 recovers after early decline

2022-01-25T11:12:00.003+08:00

Markets were mixed on Monday.

The STOXX Europe 600 plunged 3.8 percent but the S&P 500 recovered from an early sharp loss to close 0.3 percent higher.

JPMorgan stock strategist Marko Kolanovic said in a note Monday that the “recent pullback in risk assets appears overdone” and suggested that “we could be in the final stages of this correction”.

However, Morgan Stanley’s Mike Wilson said that a tightening Federal Reserve and slowing growth mean that the S&P 500 is vulnerable to a 10 percent plunge despite Monday’s late recovery.

“This type of action is just not comforting,” he said on CNBC.

Markets mixed, economy “solid”, higher rates “very likely”

2022-01-21T09:08:00.004+08:00

Markets were mixed on Thursday.

The Nikkei 225 jumped 1.1 percent and the STOXX Europe 600 rose 0.5 percent. However, the S&P 500 fell 1.1 percent.

“With rate hikes coming and the historically volatile midterm year on the horizon, more violent ups and downs could be in store for investors this year,” said Ryan Detrick of LPL Financial.

However, Detrick added that “we are looking at another solid quarter from corporate America” and that “the underpinnings of the economy remain quite solid”.

Rodrigo Catril, senior FX strategist at National Australia Bank, wrote in a Thursday note that “the economic backdrop is still pointing to an increase in inflationary pressures and resilient growth, pointing to the need for the Fed as well as other central banks to shift towards a tighter policy setting, thus higher global rates over 2022 still look very likely”.

Nasdaq closes in correction territory

2022-01-20T09:44:00.003+08:00

Markets mostly fell on Wednesday.

In the US, the S&P 500 fell 1.0 percent while the Nasdaq fell 1.1 percent into correction territory after having fallen 10.7 percent from its most recent record close in November 2021.

Elsewhere, the Nikkei 225 plunged 2.8 percent but the STOXX Europe 600 rose 0.2 percent.

“Investors worry that higher rates and tighter financial conditions will lead to valuation compression, in effect undoing much of the Fed’s decade-long largesse,” said Jack Ablin, Cresset Capital founding partner and CIO.

Stocks fall as US yields rise

2022-01-19T11:12:00.004+08:00

Markets fell on Tuesday.

The S&P 500 tumbled 1.8 percent while the STOXX Europe 600 fell 1.0 percent.

Stocks fell as the US 10-year Treasury yield hit a 2-year high, hovering around 1.87 percent on Tuesday.

“The bond market is continuing to price in a more aggressive policy tightening by Federal Reserve based on still-high inflation and the Fed’s more hawkish guidance,” said Kathy Bostjancic, the chief US financial market economist at Oxford Economics.

Meanwhile, Ryan Detrick of LPL Financial said that “the economy is indeed slowing due to omicron”, but added that “we expect any near-term slowdown of output to simply be pushed back to further quarters once the omicron worries subside”.

Indeed, the latest COVID-19 surge is showing signs of slowing in a handful of areas in the US hit earliest by the omicron variant, with New York, for example, seeing its seven-day average of daily new cases falling since hitting a record earlier this month.

Still, the World Health Organization on Tuesday said the pandemic will not end as the Omicron variant subsides in some countries.

“This pandemic is nowhere near over and with the incredible growth of omicron globally, new variants are likely to emerge, which is why tracking and assessment remain critical,” said WHO Director-General Tedros Adhanom Ghebreysus.

Markets rise, consumer prices jump, COVID-19 cases surge

2022-01-13T07:06:00.001+08:00

Markets rose on Wednesday.

The S&P 500 rose 0.3 percent, the STOXX Europe 600 rose 0.7 percent and the Nikkei 225 surged 1.9 percent.

Stocks rose despite the US reporting that consumer prices rose 7 percent in December from the previous year, the biggest jump since 1982.

Investors also shrugged off news of the continuing surge in COVID-19 cases, with the US reporting a 73 percent jump in cases for the week through Sunday and the world as a whole seeing a 55 percent increase.

“This is off the charts,” said Maria Van Kerkhove, WHO’s technical lead on Covid-19. “The sheer volume of cases is putting a burden on health-care systems.”

Powell: “We’ll be normalizing policy”

2022-01-12T09:38:00.003+08:00

Markets were mixed on Tuesday.

The S&P 500 rose 0.9 percent and the STOXX Europe 600 rose 0.8 percent. However, the Nikkei 225 fell 0.9 percent.

US investors shrugged off Federal Reserve Chairman Jerome Powell's declaration on Tuesday at his confirmation hearing that tighter monetary policy is likely this year.

“As we move through this year … if things develop as expected, we’ll be normalizing policy, meaning we’re going to end our asset purchases in March, meaning we’ll be raising rates over the course of the year,” he said.

Jeff Mills, chief investment officer at Bryn Mawr Trust Wealth Management, said that the gains in stocks on Tuesday is “just a reprieve from some pretty extreme selling we’ve had over the past number of weeks, really since the beginning of the year”.

Still, despite the risks from tighter monetary policy and rising COVID-19 infections, analysts do not see much downside for stocks.

Luca Paolini, chief strategist at Pictet Asset Management, said that “the economic recovery remains resilient nevertheless, which means stocks don’t appear particularly vulnerable to a correction”.

“There is likely to be a US stock market correction in the first half of 2022, but I expect a relatively swift recovery,” said Kristina Hooper, global market strategist at Invesco.

Economy to see “continued growth” but market faces “a lot of volatility”

2022-01-11T08:51:00.001+08:00

Markets were mostly lower on Monday.

The S&P 500 fell 0.1 percent and the STOXX Europe 600 tumbled 1.5 percent. However, the Shanghai Composite rose 0.4 percent.

Expectations of higher interest rates kept markets under pressure, with Randy Frederick, director of trading and derivatives at Schwab Center for Financial Research, saying that “there’s like an 80% probability” that the Federal Reserve will raise interest rates in March.

Economic growth, though, is expected to be resilient, with Shannon Saccocia, CIO of Boston Private Wealth, saying that “from an economic standpoint we are looking at continued growth over the next several quarters”.

Similarly, JPMorgan Chase CEO and chairman Jamie Dimon told CNBC that while it is “possible that inflation is worse than they think and they raise rates more than people think”, the economy could see “the best growth we’ve ever had this year, I think since maybe sometime after the Great Depression”.

“The market is different,” Dimon said however. “We’re kind of expecting that the market will have a lot of volatility this year as rates go up and people kind of redo projections.”

Markets fall as Fed prepares to enter “uncharted waters”

2022-01-07T11:24:00.008+08:00

Markets fell on Thursday.

The S&P 500 dipped 0.1 percent, the STOXX Europe 600 fell 1.3 percent and the Nikkei 225 plunged 2.9 percent.

Investors have been selling stocks amid concerns that the Federal Reserve will start hiking interest rates, cut the amount of bonds it buys each month and reduce its balance sheet.

DataTrek co-founder Nick Colas said in his daily note Wednesday evening that “these are truly uncharted waters”.

S&P 500 plunges as Fed considers shrinking its balance sheet

2022-01-06T09:06:00.003+08:00

US stocks fell sharply on Wednesday, with the S&P 500 plunging 1.9 percent.

Elsewhere, markets were mixed. The STOXX Europe 600 rose 0.1 percent and the Nikkei 225 rose 0.1 percent. However, the Shanghai Composite fell 1.0 percent.

Investors in the US were spooked after the minutes of the last Federal Reserve monetary policy meeting released on Wednesday showed that the central bank has discussed reducing its balance sheet shortly after it raises rates later this year.

“If the Fed starts shrinking the balance sheet that’s going to be disastrous,” said Infrastructure Capital Management CEO Jay Hatfield.

European stocks, US COVID-19 infections break records

2022-01-05T10:40:00.004+08:00

Markets were mixed on Tuesday.

The STOXX Europe 600 rose 0.8 percent to a record high but the S&P 500 dipped 0.1 percent.

US COVID-19 infections hit a record high of more than 1 million on Monday, driven by the Omicron variant.

However, JPMorgan equity strategists led by Mislav Matejka wrote on Tuesday that the “new variant is proving to be milder than the prior ones”.

“We believe there is further upside for stocks, despite a strong run so far,” they added.

Markets start 2022 on positive note

2022-01-04T10:04:00.000+08:00

Markets rose on Monday.

The S&P 500 rose 0.6 percent to a record high on the first trading day of 2022. The STOXX Europe 600 rose 0.5 percent.

“We’re still in that modestly optimistic outlook for the year ahead and think the economy and corporate profits are set up to support rising equity prices, at least in the first part of the year,” said Tom Hainlin, global investment strategist at US Bank Wealth Management.

Investors shrugged off the continuing rise of COVID-19 cases, with Liz Young, SoFi’s head of investment strategy, suggesting that the Omicron wave could be over faster than those of earlier variants.

However, Young also said that “what we saw with this last wave is it impacted supply and not demand, which tells me that inflation is still here to stay for the first half of 2022”.

Markets mostly fall, China stocks look “attractive”

2022-01-01T09:17:00.005+08:00

Markets were mostly lower on Friday.

The S&P 500 fell 0.3 percent and the STOXX Europe 600 fell 0.2 percent.

However, the Shanghai Composite rose 0.6 percent after China reported that its official manufacturing PMI rose to 50.3 in December from 50.1 in November.

Earlier this week, UBS Global Wealth Management’s regional chief investment officer Kelvin Tay told CNBC that Chinese stocks currently look “very, very attractive” after underperforming relative to European and US stocks.

However, Tay added that the Chinese market is unlikely to recover in the next three months due to a “distinct lack of catalysts”.

Markets mixed, COVID-19 threatens US hospitals and chip supply

2021-12-31T09:03:00.003+08:00

Markets were mixed on Thursday.

The S&P 500 fell 0.3 percent but the STOXX Europe 600 rose 0.2 percent.

Earlier in Asia, the Nikkei 225 fell 0.4 percent but the Shanghai Composite rose 0.6 percent.

The surge in COVID-19 infections continue around the world, with some hospitals in the US reporting packed emergency rooms as the country hit a new pandemic high of 300,886 average new daily cases over the week to Wednesday.

“What we're experiencing right now is an absolute overwhelming of the emergency departments” in Washington, said Dr James Phillips, chief of disaster medicine at George Washington University Hospital.

Meanwhile, an outbreak of COVID-19 infections in the Chinese city of Xi'an could aggravate a global chip shortage. Samsung and Micron reported on Wednesday that they have had to adjust operations in the city after authorities enacted a stringent lockdown.

Markets mixed amid inflation fears and COVID-19 surge

2021-12-30T06:49:00.001+08:00

Markets were mixed on Wednesday.

The S&P 500 edged up 0.1 percent to close at another record high. However, the STOXX Europe 600 dipped 0.1 percent and the Nikkei 225 fell 0.6 percent.

“The seasonals favor further gains in the market,” said Wells Fargo Investment Institute’s Gary Schlossberg.

A CNBC survey showed that investors fear inflation most in 2022.

Meanwhile, COVID-19 also remained a concern as the US confirmed more than 4.5 million cases this month.

Dr Anthony Fauci said on Wednesday that the latest wave of the pandemic may hit its peak in the US by the end of January.

However, the World Health Organization warned on Wednesday that new coronavirus variants could emerge during the pandemic that render the current vaccines useless.

Omicron surge could be most devastating one yet

2021-12-28T11:15:00.001+08:00

Markets rose on Monday, with the S&P 500 gaining 1.4 percent to close at a record high.

Markets rose even as many countries are implementing new restrictions to stem the rise in Omicron infections.

“We do not expect Omicron to impact the growth outlook in any significant way, but rather it is likely to accelerate the end of the pandemic,” said JPMorgan’s Dubravko Lakos-Bujas in a note.

Still, the virus could cause a lot of problems before the pandemic comes to an end.

A report from researchers at the COVID-19 Modeling Consortium at the University of Texas, Austin showed that the Omicron surge could be the most devastating one yet in the US.

“Across all scenarios we expect to see cases that are at least as high as the Delta surge in September 2021, but that would be the minimum,” said Lauren Ancel Meyers, director of the UT consortium. “At a maximum we could see a surge in cases that is even higher than our January 2021 surge, which would make it the biggest national surge seen to date.”

Investors take “sunnier view” despite rise in Omicron cases

2021-12-27T13:59:00.003+08:00

The S&P 500 rose 2.3 percent last week as investors turned optimistic towards the year end.

“I think all the things we’ve been concerned about for the month of December to a certain extent, are in the rearview mirror,” said Art Hogan, chief market strategist at National Securities.

“Whereas the market was focusing on everything that could go wrong since Thanksgiving, people are now just taking a sunnier view,” said Paul Hickey, co-founder of Bespoke Investment Group.

Studies showing that the Omicron variant may be milder than other variants of the coronavirus has fed the optimism, although US infectious disease expert Dr Anthony Fauci warned against complacency.

Fauci told ABC on Sunday that infections “go up and up” every day and “we don't want to get complacent” because “when you have such a high volume of new infections, it might override a real diminution in severity”.

S&P 500 hits record high, hope for Santa rally

2021-12-24T09:18:00.001+08:00

Markets rose on Thursday.

The S&P 500 rose 0.6 percent to a record high, the STOXX Europe 600 rose 1.0 percent and the Nikkei 225 rose 0.8 percent.

Jim Paulsen, Leuthold Group’s chief investment strategist, said that “dip-buyers not wanting to miss out on a Santa Rally have taken charge”.

Investors were also encouraged by news that the Omicron variant of the COVID-19 virus is less likely to result in hospitalisation than earlier strains.

Investors “increasingly bullish”, COVID pandemic end seen

2021-12-23T10:50:00.001+08:00

Markets rose on Wednesday, with the S&P 500 gaining 1 percent.

Chris Hussey, a managing director at Goldman Sachs, said that “markets appear to finally be calming down” as the “triple headwinds of rising virus cases, a more hawkish Fed, and elusive fiscal stimulus are absorbed into risk-asset prices”.

“The news flow is negative in the near-term as the Omicron wave causes economic and corporate earnings dislocations, but investors are increasingly bullish looking out beyond the next few weeks,” said Adam Crisafulli, founder of Vital Knowledge.

Indeed, some experts see the fast-spreading Omicron variant of the COVID-19 virus actually hastening the pandemic's end by building natural immunity among the population that could help protect against Covid’s next variant of concern.

“As all the public health folks have been saying, it’s going to rip right through the population,” said Dr David Ho, a world-renowned virologist and Columbia University professor. “Sometimes a rapid-fire could burn through very quickly but then put itself out.”

Markets rise, Omicron to push health systems “to the brink”

2021-12-22T09:20:00.005+08:00

Markets rose on Tuesday.

The S&P 500 jumped 1.8 percent, the STOXX Europe 600 rose 1.4 percent and the Nikkei 225 surged 2.1 percent.

“The market seems to be reacting to a short-term oversold position,” said Timothy Lesko, principal at Granite Investment Advisors. “If omicron-induced illness remains mild, which seems to be of some debate, we could see a rally.”

Mark Hackett, Nationwide’s chief of investment research, said that “increased volatility and thinner trading volumes could cause the market to overreact, which could be a buying opportunity in the run-up to Christmas”.

Meanwhile, though, the Omicron variant of the COVID-19 virus continues to be a threat to the world.

Data published on Monday by the Centers for Disease Control and Prevention show that the Omicron variant is now the dominant COVID-19 strain in the US, representing 73 percent of sequenced cases.

In Europe, Hans Kluge, the World Health Organization's top official in the continent, warned that Omicron will dominate in more countries of the region, “pushing already stretched health systems further to the brink”.

And while leaders have pushed the people in their countries to get vaccinated against COVID-19, a report in the New York Times said that research so far suggests that the vaccines used in most of the world offer almost no defense against becoming infected by the Omicron variant.

“[O]nly the Pfizer and Moderna shots, when reinforced by a booster, appear to have initial success at stopping infections, and these vaccines are unavailable in most of the world,” the report said.

“The other shots — including those from AstraZeneca, Johnson & Johnson and vaccines manufactured in China and Russia — do little to nothing to stop the spread of Omicron, early research shows.”

Omicron restrictions loom

2021-12-20T08:49:00.002+08:00

The S&P 500 fell 1.9 percent last week.

Still, Paul R La Monica at CNN noted that the “S&P 500 is up 23% this year and is just a little more than 1% from its record high”.

This is despite the rise of the Omicron variant of COVID-19 around the globe raising the possibility that countries may have to implement new lockdowns, a possibility that, he wrote, “might not be priced into the broader stock market just yet”.

Indeed, the Netherlands entered a strict new lockdown Sunday in response to fears over the spread of Omicron.

Meanwhile, in the UK, Health Secretary Sajid Javid said on Sunday that he could not rule out restrictions before Christmas while London Mayor Sadiq Khan said that new COVID-19 restrictions were “inevitable”.

In the US, businesses are already reacting to the spread of Omicron.

“Some Broadway shows in New York City have been canceled,” wrote La Monica. “And companies ranging from Apple and Ford to ridesharing firm Lyft and investment bank Jefferies have recently announced plans to delay workers' return to the office. More businesses are likely to follow suit.”

Omicron "a major, imminent threat to public health"

2021-12-18T10:45:00.005+08:00

Markets fell on Friday.

The S&P 500 fell 1.0 percent, the STOXX Europe 600 fell 0.6 percent and the Nikkei 225 plunged 1.8 percent.

Worries over the Omicron variant continued to weigh on markets.

A study by Imperial College London showed that the risk of reinfection with the Omicron variant is more than five times higher and it has shown no sign of being milder than Delta.

The study also showed that the effectiveness of vaccines is reduced against the Omicron variant compared to Delta, suggesting that the "level of immune evasion means that Omicron poses a major, imminent threat to public health".

BoE hikes rates, ECB cuts bond purchases

2021-12-17T11:41:00.001+08:00

Markets were mixed on Thursday.

The S&P 500 fell 0.9 percent but the STOXX Europe 600 jumped 1.2 percent.

Thursday’s decline in US stocks followed gains in the previous session after the Federal Reserve announced a more aggressive plan to wind down its asset purchases and hike rates in 2022.

However, in Europe, stocks gained despite the Bank of England on Thursday hiking interest rates for the first time since the onset of the pandemic and the European Central Bank announcing a cut in its bond purchases.