Weekly market update : Tech giants limit the damage
01/28/2022 | 11:42am EDT
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Financial markets experienced a violent air pocket on Monday on the back of fears of monetary tightening, before trying to regain some height for the rest of the week, while the Fed announced that it would start to raise interest rates in March. Nevertheless, volatility tends to intensify, with erratic movements of strong amplitude on most indexes. However, the results of several emblematic companies provided some comfort.
Kohl's (+28%): The stock soared more than 30% on Monday after the department store group received a purchase offer. The stock is flirting with USD 60 while a duo Acacia / Starboard Value has proposed USD 64 per share. Sycamore Partners could bid USD 65.
Corning (+15%): In a sharply falling US market, the group is doing well after posting very good quarterly results. Goldman Sachs took the opportunity to go back to the buy side, targeting USD 50, compared to USD 38 previously.
Tesla (-12%): Things are still complicated for the Californian car manufacturer. Despite good quarterly results, the stock slipped after the company said it would announce no new model this year and confirmed that growth remains hampered by supply constraints.
Advanced Micro Devices (-15.2%), a leading chip maker, saw its stoke plunge, like its peers, after Intel posted guidance that fell short of expectations. The fall of the Nasdaq worsens the situation.
Fresnillo (-24.1%), the London-listed Mexican precious metals miner, has lowered its 2022 gold production forecast due to disruptions related to Covid and new laws governing labor in Mexico.
Oil markets are definitely in Olympic form. As proof, the price of Brent crude oil has risen for the sixth week in a row and has the luxury of crossing the USD 90 per barrel line. The same is true for the US benchmark, WTI, which is close to the USD 88 mark. The environment remains favorable for the energy sector, given the supply problems and the growing geopolitical friction on Europe's doorstep.
OPEC+'s inability to meet its commitments for additional production is also fueling buying pressure. According to data from the International Energy Agency (IEA), the expanded alliance increased its supply by 250,000 barrels per day in December, against a target of 400,000 barrels per day. Precious metals were battered this week, penalized by the Federal Reserve's statement, which strengthened the greenback and bond yields, much to the dismay of the barbarian relic. In a sign of capitulation, gold is once again trading below the USD 1,800 per ounce mark. This sharp decline is also affecting silver and, to a lesser extent, platinum.
It should be noted that palladium remained well positioned this week due to Russia's significant weight in the production of this metal, which accounts for nearly one third of global supply. As for industrial metals, it is generally time to breathe a sigh of relief due to the rise of the greenback. Only aluminum prices have remained relatively firm. Here again, the Russian threat is causing concern, while at the same time, European smelters are still having to deal with high energy bills, which is weighing on their production. Aluminum is thus trading above USD 3100 per metric ton.
In agricultural commodities, strong demand for soybeans in the US has boosted soybean oil prices over the past five days. Soybean oil is trading at 65 cents per pound in Chicago, an increase of nearly 15% since January 1. On another note, lumber prices have seen a sharp decline this week. A flurry of job cancellations weighed on the trend, pushing prices below USD 1,000 per thousand board feet.
The correction that started at the beginning of the year, which was accentuated last week, continued. Technology stocks are once again in the eye of the storm, after a first Fed 2022 meeting with a somewhat curious outcome. Curious because if the US central bank issued a statement close to what the market expected, its chairman Jerome Powell was more aggressive than anticipated during the press conference that followed. Investors saw this as a sign that the Fed might be getting a little aggressive to get rid of inflation. Far from being the lifeline some were hoping for, this meeting only amplified doubts.
It also strengthened the greenback. It took USD 1.1137 for 1 EUR at the end of the week, compared to USD 1.3 a few days earlier. The British pound is paying the heaviest price among the major currencies, with a severe slide to USD 1.3374, despite the potential for a Bank of England rate hike next week. It should also be noted that the greenback's rally was helped by the release of better than expected Q4 GDP growth in the US (6.9% annualized vs. 5.3% expected), in contrast to a German GDP quarterly contraction.
Bond yields are on the rise, but not excessively so: 1.84% for the 10-year T-Bond and -0.02% for the Bund on the same maturity. The French OAT is up to 0.39%. The Swiss signature is symbolically back in the green (0.01%).
On the bitcoin side, crypto-investors are holding their breath. They are still not safe from a further plunge in the price of the digital currency. Although the price is currently stabilizing around $36,000, after a drop of almost 50% in just over two months, the digital gold's valuation could still go off the rails. Even if the last few days have been punctuated by the integration of blockchain-nft solutions into well-known services such as Facebook, Instagram or Twitter, it is clear that these announcements have not had the impact on the price of cryptocurrency that was anticipated.
Next week, the first January inflation figures will start to come out in Europe, along with the final PMI readings. The Bank of England and the European Central Bank will announce their first 2022 monetary policy decisions on Thursday. In the United States, the focus will be on the January employment figures, presented on Friday.
Tech giants limit the damage
Markets have had quite a week of turmoil: Rate hikes, slowdown in expected growth, economic statistics at their highest, earnings seasons... Traders don't know which way to turn as the information available is so disparate and contradictory. The propsect of a rate hike in March, tensions in Ukraine, inflation, the sector rotation towards value stocks... Does this mean the end of growth stocks? Nothing is less certain, given that traders are anticipating a slowdown in growth and could start buying growth stocks again. The Russell 2000 index, which is usually a step ahead of the market, has entered a bear market (i.e. it has fallen more than 20% since its 52-week high). For now, U.S. markets, which drive the rest of global market, are only as strong as the behemoths that make them up. Market giants such as Apple and Microsoft have all three published excellent figures. Let's remember that bear markets are an integral part of long-term investing. Trying to anticipate them is illusory. But rest assured, every significant decline has generally been followed by a strong rebound the following year, and this has been the case since 1950.
Things to read this week
Cloud Computing: The key players to keep an eye on Cloud computing is a computer system that operates by the joint action of disparate elements brought together regardless of their geographical location and... Read more
US inflation figures and earnings reassure investors The core personal consumption expenditure price index, often touted as the Fed's preferred gauge to measure inflation, was in line with expectations,... Read more
*The weekly movements of indexes and stocks displayed on the dashboard are related to the period ranging from the open on Monday to the sending time of this newsletter on Friday. The weekly movements of commodities, precious metals and currencies displayed on the dashboard are related to a 7-day rolling period from Friday to Friday, until the sending time of this newsletter. These assets continue to quote on weekends.