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Market Perspective for January 10, 2022

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Volatility continued on Monday with the equities swinging down in the morning and back up in the afternoon. The Nasdaq fell below its December low before finishing the day up 0.05 percent. The S&P 500 Index fell 0.14 percent, the Dow Jones Industrial Average 0.45 percent and the Russell 2000 Index 0.40 percent.

SPDR Healthcare (XLV) climbed 1.02 percent on Monday. Technology shares rebounded after the 10-year yield eased back from 1.80 percent down to 1.78 percent. After leading the market lower for most of the day, SPDR Technology (XLK) finished up 0.02 percent. The next best performer was SPDR Energy (XLE), down 0.31 percent.

The volatility seen on Monday could continue the rest of this week. On Tuesday, Federal Reserve Chairman Jay Powell will have his confirmation hearing with the Senate. In November, he sparked some market selling with his hawkish statements. His nomination could spark more pointed criticism from Senators who are hearing from constituents about high inflation.

In addition to Powell, three other Federal Reserve bank presidents speak publicly this week. Two have made hawkish comments in the past couple of months. Cleveland Fed President Mester has been the most hawkish. She’s called for a March rate hike and for asset sales starting in July.

On Wednesday, the consumer price index will be released. Economists project a 0.4 percent rise in December and 0.5 percent for core CPI. Headline CPI will likely hit 7.0 percent for the year.

The producer price index will be released on Thursday. Analysts expect 0.4 percent growth in December.

On Friday, retail sales for December will be released. Analysts project sales fell 0.1 percent, with sales ex-autos up 0.3 percent.

Friday will also be the unofficial kickoff of earnings season with megabanks J.P Morgan (JPM), Wells Fargo (WFC) and Citibank (C) delivering results. Economists project S&P 500 earnings rose 21.7 percent in the last quarter, driven by energy, materials and industrial firms.

Crude oil will play a crucial role in inflation expectations over the coming weeks. West Texas Intermediate crude fell to $78.23 per barrel on Monday, down from a high above $80 last week. Crude has reversed all its losses D by the Fed’s hawkish policy shift and the omicron variant outbreak last year, but it remains below its recent high above $85 in October.