US Indices
|
Name of the index |
Friday’s close |
Net Change |
Net Change (%) |
|
Dow Jones Industrial (US 30) |
35,911.81 |
-157.06 |
-0.44% |
|
Nasdaq (US Tech 100) |
15,611.59 |
-2.84 |
-0.02% |
|
S&P 500 (US 500) |
4,662.85 |
-7.44 |
-0.16% |
Source: Bloomberg
It was a bumpy ride for the US indices last week. The S&P 500, the Nasdaq 100 and the Dow Jones were down for the week by -0.16%, -0.02% and -0.44% respectively.
Stocks jittered as traders monitored a disappointing set of bank earnings along with a larger-than-expected fall in US retail sales. First, JPMorgan Chase (JPM) dived 6.6% after the firm posted underwhelming 4th quarter revenues and absorbed the additional costs of rising compensation expenses. Similarly, Citigroup (C) shares reversed after experiencing a similar miss on trading revenues during the 4th quarter.
The risk-averse sentiment also increased due to disappointing data releases such as the December retail sales in the US, which fell by 1.9% MoM, marking its most significant drop since February 2021.
Furthermore, traders are also worried about ongoing price pressure across the US economy. The latest print from the Bureau of Labor Statistics showed that consumer prices rose at a 7% YoY in December, marking its hottest spike in 4 decades.
Those figures came after the last policy meeting of 2021, in which the Federal Reserve appeared more inclined to raise interest rates in March 2022 to combat rising prices. JP Morgan CEO Jamie Dimon now expects up to 6 or 7 incoming interest rate hikes this year, doubling down on his earlier bet of only 3 or 4.
But, last week also saw winners like Netflix shares (NFLX) climb more than 1% to help boost the Nasdaq on Friday, 14 January 2022. This rise came following the company’s announcement to raise prices for US and Canadian consumers.
Market experts anticipate the 1st quarter of 2022 to be volatile for tech and growth stocks. “The 1st quarter should be rising yields, rising rates, an outperformance of cyclicals, and we think that the long duration growth names are going to have a challenging quarter”, Alicia Levine, the head of equity at BNY Mellon Wealth Management, remarked.
Forex
Source: Bloomberg. Click to see full size
On Friday, 14 January 2022, the dollar snapped out of its three-day losing streak as traders avoided riskier currencies amid fears that the US Federal Reserve’s tightening policies were already included in asset prices.
The greenback was pressured, even though Fed Chair Jerome Powell said the US economy is ready for tightening monetary policy, and inflation data showed the largest annual rise in nearly 4 decades.
Despite being 0.3% higher on Friday, 14 January 2022, the US dollar index closed the week about 0.6% lower, showing its worst performance since early September.
Meanwhile, despite several solid macroeconomic releases, the British Pound struggled to hold onto the $1.3700 level against the US dollar during the New York session. The US dollar Index rose by approximately 0.25% in the last hour, sitting at $95.05. This rise was spurred by the rise in yields on US 10-year Treasury bonds, up to 1.75%, a three basis point gain.
Currently, GBP/USD is trading at $1.36800, which lies between 61.8% retracement support at $1.36300 and 78.6% retracement resistance at $1.37500.
In relation to the Japanese yen, the US currency fell 0.02% to more than a three-week low of ¥114.150. The safe-haven Japanese currency has benefited from the recent souring of risk sentiment in global financial markets. Plus, policymakers at the Bank of Japan are also debating when they can start telegraphing an eventual rate hike, which could happen before inflation reaches the bank’s target of 2%.
Technically speaking, USD/JPY is currently trading at the ¥114.300 level, right below its 50% retracement level of ¥114.450.
Commodities
Source: Bloomberg. Click to see full size
Last week, gold ended on a high note mainly due to the 10-year US Treasury yield, which dropped from 1.8% to 1.7%, helping gold maintain its bullish momentum. Another contributing factor was the Consumer Price Index, published on Wednesday, 12 January 2022, which rose by 7% YoY in December. Overall, gold started its week at around $1,800 and ended at around $1,817.
Technically, gold is trading near its resistance, around $1,835 at the 61.8% retracement level. If it does breach the resistance, the new resistance would be at around the $1,890 mark at the 78.6% retracement level.
This week will not feature any high-tier data; however, traders will closely observe the bond yield. If the 10-year US Treasury yield falls below 1.7% and stays there, the US dollar will face new selling pressure, and gold could rise. Conversely, a break above 1.8% would put pressure on gold.
Oil has continued its bullish momentum as the US dollar weakened and headed towards its most significant weekly fall in 4 months. Generally, a weaker US dollar makes the price of commodities more affordable for traders in other currencies.
However, oil prices reached a multi-year high, with demand outweighing supply and signs that the Omicron variant is not as disruptive as anticipated. WTI rose by around 6% last week, whereas Brent rose by about 5% last week. Meanwhile, China aims to release oil reserves during the Lunar New Year holidays as a strategic plan alongside the United States to curb the global prices of oil.
Cryptocurrencies
Source: Bloomberg. Click to see full size
This week, Bitcoin’s price has turned around after losing 20% in the last two weeks due to fears of an interest rate hike and a spike in Omicron cases. It is currently trading at $43,100, up by 3% in the last 7 days.
The daily chart shows that Bitcoin is trading around its resistance of $44,000 at the 38.2% retracement level, whereas the support level lies around the $39,000 mark at the 23.6% retracement level.
Several top altcoins gained over 15% this week, including Polygon (MATIC) and Polkadot (DOT). However, the price of Dogecoin soared over 17% after Elon Musk announced that the cryptocurrency could be used to purchase Tesla products.
The store, which offers a broad range of manufactured and branded Tesla products like quad bikes for children, portable wireless chargers, men and women clothing, and accessories, has seen some of its products sold out since integrating DOGE payments.
In the last days of 2021, traders began to visualize the potential of Dogecoin after Elon Musk’s tweet in December, where he first announced an upcoming pilot test of Doge as a payment option for Tesla.
Furthermore, Solana’s scalability, low transaction fees, and ease of use have been affirmed by Bank of America (BoA) strategists. In a note released last week, the company describes Solana as the ‘Visa of the digital asset ecosystem.’
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