Investors come off a strong week looking for more gains now that they have some clarity from the Fed
Traders in New York City work at the New York Stock Exchange (NYSE), February 4, 2022.
Spencer Platt | Getty Images
Now that the Federal Reserve has raised its rate for the first time, the market professionals are pondering whether it can maintain the recent upswing.
The stock market rose in the best week in the year thanks to a strong rally in tech and growth stocks. These are the S&P 500The week ended Friday afternoon with a 5.5% increase, while the NasdaqIt was 7.5% higher
The top-performing sector was consumer discretionary stocks, which saw an increase of more than 8%, and technology up around 7%.
The names most severely punished, such as airlines, were also among the largest winners of the week. For the week, airlines saw an increase of 15%. Names with high growth also saw a bounce, as did the Ark Innovation Fund,This fund has seen a remarkable 18% growth. Over the past six months, it has fallen more than 45%.
Ukraine will continue to be a focus,In the next week, volatility could be a constant theme in headlines. Investors also pay attention to the development of Covid. This is an emerging threat that is disrupting cities in China and spreading at an even faster rate across Europe.
More than half a dozen Fed speakers are scheduled, with Jerome Powell (Federal Chairman) appearing at Monday’s economics conference. It is a relatively quiet economic year, with only durable goods, services, and manufacturing PMI released this Thursday.
“The rate hike caused more harm than the anticipation of its first hike.” With the Fed switching from transitory inflation towards tapering, we got ourselves into a bad situation. It happened in December. [bond purchases]Art Hogan is National Securities’ chief market strategist. As a headwind, that’s sort of over us. This reduces the effect that Fed speakers can make.
Indeed, the market ignored Friday’s hawkish remarks. St. Louis Fed President James BullardChristopher Waller (Fed Governor), who appeared on CNBC.Both stated that they would like to see rates rise faster than normal. median seven hikesThe Fed anticipates that this year will be a good one.
The Fed published Wednesday’s interest rate prediction.t raised its fed funds target rateThe Fed raised its rate by one quarter point from 0.25% to 0.5%, marking the first hike in rates since 2018. At its next meeting, the Fed said that it would consider reducing its almost $9 trillion debt.
The stock markets did very well over the last week in tech and growth, which is why they have been most affected by rising interest rates. Because investors are buying them to ensure future earnings, they tend to command higher prices. This makes them extremely attractive.
Strategy experts say tech can continue to gain in a rising rate environment,Now, some excesses have been weeded out. They may no longer be the same leaders as they were once.
Look beyond the Fed
Julian Emanuel from Evercore ISI, Head of Equities and Derivatives, stated that the Fed has set the scene for investors to refocus on earnings. “Bottom line…earnings estimations since the beginning have risen.”
Emanuel indicated that the market is likely to continue growing in the immediate term, subject to any geopolitical developments. Although oil prices appear to have reached a peak, Emanuel said that stocks may still be at their lowest point for the year.
Emanuel stated that “Sentiment” is infuriating. Investors can ignore the Fed’s recent rate-hiking cycle, he said.
“We’re there. We are aware of what is going to happen. We are certain they will do 0.25% by May. We are certain they will start QT [quantitative tightening]He said that it would be at least mid-year. They aren’t raising rates sufficiently to really hurt the market. Investors can now focus on earning again. He expects S&P 500 profits to be up 9.3% this year.
Hogan indicated that although the market seems to favor a favorable outcome, like a ceasefire for Ukraine, there are no indications of an end in sight.
He stated that everyone is predicting the end of this in weeks, rather than in months. “If it doesn’t, then the market will have to rebalance that.”
These are the stocks charts.
Scott Redler is a partner at T3Live.com and his focus is on short-term technicals. He said that after a strong run the market might be able to digest some gains earlier in the week.
Most active traders reduce risk after a week of impressive trading. [S&P 500]Redler said that 4,400 is the highest level and not an addition to it.” We might be able to digest the quadruple witching for at least a couple of days, which could indicate that we are on our way towards 4,600. Friday saw the quadruple extinguishment of futures and options.
Redler said Russia’s war in Ukraine and Fed policy tightening will continue to hang over the market, and that might keep the S&P 500 in a range. He said, “I don’t believe anyone thinks the market will go right back to its all-time highs any time soon.” I believe we are right in the middle of an area. It’s a neutral place that doesn’t allow you to go too short or add longs. Next week, we’ll be able to digest it. Oil is my favorite fuel, which I believe could have helped me get through the rest of the year.
Oil spiked briefly to $130.50 a barrel in early March, as investors worried that sanctions against Russia might restrict oil exports and cause major shortages. The price of oil has dropped back since then. West Texas Intermediate crude futures were trading just under $105 per barrel Friday.
Redler said an important test for the S&P 500 will be to see if it can hold the top third of its range and stay above 4,330. He said, “If it can maintain that, then the next move might be higher.” That would be a sign of commitment to the actions this week.
Redler stated that technology shares have made strong returns and he will be watching closely to see how they do.TeslaThis week, he was the leader. “A lot of tech names did not break their downtrends,” said he. “Tesla, NVIDIAAnd AmazonBuyable stocks that are dip-worthy…NVIDIA provided clues as to why the bounce seemed as plausible as possible because it was the first stock to break its downtrend line.
Apple and Microsoft weren’t a headwind, but they were a tailwind. Redler indicated that they might be able to perform a bit better than the broad indices if they can. Redler said that the stocks with the largest market caps were up on the week but trailed the Nasdaq’s gains due to large sell imbalances after the quadruple witching expired.
Redler explained that stocks with large buybacks tend to have greater selling imbalances.
Week ahead calendar
Earnings: Nike,Tencent Music
9:00 a.m. Fed Chairman Jerome Powell addresses the NABE Economic Policy Conference
8:30 a.m. Raphael Bostic, President of Boston Fed at NABE
QFR 10:00 am
10:00 a.m. John Williams, President of the New York Fed
10:00 a.m. New home sales
Earnings: Darden RestaurantsFactSet, NIO
8:30 a.m. 8.30 a.m.
8:30 a.m. Durable goods
8.30 a.m. Current accounts
9.45 AM Manufacturing PMI
PMI services at 9:45
10:00 a.m. New home sales
10:00 a.m. Atlanta Fed President Raphael Bostic
10:00 am New York Fed Williams
10:00 a.m. Pending home sales
10:00 a.m. Consumer sentiment
11:30 a.m. Richmond Fed President Tom Barkin