Top 5 Things To Watch For In The Markets In The Coming Week By

© Reuters

By Noreen Burke – The coming week will bring closely watched inflation numbers, as Federal Reserve Chairman Jerome Powell and Vice President Lael Brainard testify in their nomination hearings on Tuesday and Thursday, respectively. It also marks the start of the fourth quarter earnings season with several major banks reporting on Friday. Volatility is expected to remain high in the stock markets after a choppy start through 2022 and Bitcoin remains under pressure. Here’s what you need to know to start your week.

  1. Inflation data

Wednesday’s consumer price inflation data is expected to show headlines topping 7% year-on-year – quickly approaching a four-decade high – with an increase well above 5% year-on-year. the next day’s data should also show a larger increase.

Inflation numbers will likely highlight why the Fed could start its rate hike cycle as early as March. In addition to the argument for a faster tightening, Friday’s argued that the labor market is at or near maximum employment.

While job growth was disappointing in December, the unemployment rate fell to its lowest level in 22 months and wages rose sharply.

Inflation data will be followed by reports in December and Friday.

  1. Powell’s Testimonial

Fed Chairman Jerome Powell is due to appear before the Senate Banking Committee on Tuesday in a hearing to confirm his appointment to a second four-year term as Fed head while Fed Governor Lael Brainard is due appear before the same commission two days later for a confirmation hearing on his appointment as vice-chair.

Several Fed officials are also expected to make appearances during the week, including Esther George, James Bullard, Loretta Mester, Charles Evans, Thomas Barkin and John Williams.

Their comments will be followed closely following those of last week, which indicated that a “very tight” labor market and high inflation could force the authorities to raise interest rates sooner than expected.

  1. Earnings

The earnings season kicks off in earnest over the coming week, as investors get a glimpse of fourth quarter results from several major banks, including JPMorgan Chase (NYSE :), Citigroup (NYSE 🙂 and Wells fargo (NYSE 🙂 before the market opens on Friday.

Massive increases in US corporate profits contributed to a 27% gain in 2021, but companies are likely to struggle to post similar numbers for the fourth quarter.

Profits of S&P 500 companies are expected to jump 22.3%, according to Refinitiv data cited by Reuters – a solid increase, but still at a slower pace than seen in the first, second and third quarters.

Investors will be eager to hear about inflation, whether companies believe the tight supply chain that helped push prices up last year will ease in the coming months and forecast for 2022.

  1. Volatility to pursue

Indications that the Fed is poised to hike rates faster than expected as it battles rising inflation disrupted markets in the first week of 2022 and volatility is likely to continue.

Falling 0.3% last week, the S&P 500 was down 1.9% and down 4.5%, while the US benchmark yield climbed to a two-year high on Friday on the outlook rate hike from the Fed.

“The sentiment has turned negative,” Jake Dollarhide, managing director of Longbow Asset Management in Tulsa, Oklahoma, told Reuters. “Right now the market is nervous and in a mood to sell at the first sign of bad news.”

Investors replaced technology-intensive growth stocks with more value-oriented ones, which they said could do better in a high interest rate environment.

The increase in cases of the Omicron variant of the coronavirus has also contributed to the mood at risk in the markets.

  1. Bitcoin

has been under pressure since the start of the new year, falling to its lowest level since late September amid a massive cryptocurrency sell-off motivated by concerns about the prospect of a more hawkish Fed.

The world’s largest cryptocurrency by market value has fallen more than 40% since reaching an all-time high of $ 69,000 in November, amid expectations that the U.S. central bank will raise interest rates earlier than expected.

More aggressive policy action by the Fed would undermine investor appetite for riskier assets.

“We are currently seeing a broad sense of risk in all markets as inflationary concerns and rate hikes appear to be at the forefront of speculators’ minds,” Matthew Dibb, COO of Singapore crypto platform Stack told Reuters. Funds.

“BTC liquidity has been pretty thin on both sides and there is a risk of a setback towards the mid-1930s in the short term.”

Bitcoin has also suffered a drop in pressure, as the global computing power of its network fell sharply last week following Kazakhstan’s internet shutdown in an uprising, which hit its crypto mining industry. rapidly growing currency.

–Reuters contributed to this report