Stocks could face more turbulence in the week ahead
Traders are seen on the New York Stock Exchange’s floor in New York City (USA), November 29th, 2021.
Brendan McDermid | Reuters
After a week of volatile swings which sent stocks plunging, volatility could still plague the markets.
Investors will be watching for more information on Friday’s omicron Covid variation and another inflation report that should show consumers prices at their highest level in over three decades.
Stocks fell on concerns about the Omicron variant, and the Federal Reserve’s plans to ease its policies and increase interest rates earlier than expected. Fed Chairman Jerome Powell told a Congressional panel TuesdayWhen it meets on Dec. 14-15, the Federal Reserve will discuss speeding up the end of the $120 million monthly bond-buying program. In early 2020, the Federal Reserve created a bond-purchasing programme to support the economy during the pandemic.
Jack Ablin from Cresset, chief investment officer, said, “It will be a turbulent December. We probably need to wait to get earnings season regrounded, back at fundamentals.” Although some ratios might suggest otherwise, the price-to earnings, the price-to sales, and the price-to incomes are not bad when combined with the interest rates and all other factors. We are not at the edge of a rock, I think.
Ablin stated that Powell’s remarks were disturbing to investors. Investors fear that the Fed may increase interest rate increases. Powell admitted that he wasn’t right about inflation being temporary or “transitory”, which is what spooked investors. Bond purchases will now be ended in June.
“I don’t know how investors view inflation. Are they assuming that the Fed will raise rates? Or, if it does so too quickly and then everything will just roll over? Ablin said that since Powell’s talk on ‘transitory,’ investors have been somewhat off-balance.
Friday’s CPI (consumer price index) for November will be released. Dow Jones polled economists and predicted that it would rise 0.6% monthly, or 6.7% annually. This compares with a 0.9% gain in OctoberThe biggest change in 30 years is a 6.2% increase year-over-year
Growth and high fliers were the worst hit on Friday as investors exited some of their most volatile stocks. Treasury yields declined Friday after stocks fell. This was seen by many as a flee to safety because yields are inversely related to price. These are the 10-yearNote yield dropped to 1.35%
The ARK InnovationETF dropped 12.6% in the last week. The fund includes many growth names. plunged into bear market territory. Investors need to remember that this is not a strategy for 15 weeks. Ablin explained that the strategy is 15 years long.
In the coming week, Federal Reserve officials should remain quiet. Fed officials don’t usually make big speeches in the Blackout Period, which runs from Thursday to Friday, before their meeting on Dec. 14-15. Neel Kazhkari of the Minneapolis Fed, who spoke Thursday at Center for Indian Country Development Research Summit.
A lot of attention will be placed on the performance of the market.
Scott Redler from T3Live.com said, “Ever since Nov. 22 outside bearish day all strength has been sold under the hood with lots of damage,” “Now some of these leadership names have begun to show faulty actions.” Both were noted by him. MicrosoftAnd Apple were weaker.
The S&P fell through its 50-day moving average for a second day on Friday. At 4,544, the 50-day moving average is. This is a warning sign to market professionals that the index could be on the brink of collapse. The closing price for the last 50 days is called the 50-day moving mean.
“Basically it’s a retesting of support, because we had relief rally [Thursday]Fairlead Strategies’ founder, Katie Stockton stated that “it is possible.” She said the S&P 500 needs to close below the 50-day for two consecutive days before the move is considered a breakdown.
Stockton said that the action seen in high-growth, multiple names is not good. We do see signs of downside exhaustion. However, they are not as prevalent as I would like. Adobe is one example of a heavyweight that has been removing the levels such as the 50-day moving mean. Some of the big names are now involved in selling, she said.
We’re only watching to see how it turns out. Stockton said Monday will be the telling. It also has the weekend for it to settle… Extremes seem a lot more extreme. From a contrarian perspective, sentiment is most oversold since October’s low.
Earnings: Coupa Software, Sumo Logic
8:30 a.m. Trade balance
8:30 a.m. Productivity and cost
Treasury auctions $54Billion 3 Year Notes at 1:00 PM
3.00 PM Consumer credit
Mortgage Applications at 7:00 AM
JOLTS 10:00 am
Treasury auctions 10-year bonds worth $36 billion at 1:00 pm
8:30 AM Unemployment claims
Treasury Auctions: $22 Billion 30-year Bonds
8:30 AM CPI
10:00 a.m. Consumer sentiment