The market still in shock?
US stock markets and in the line with that, other markets also were gaining in the past three days, ignoring published data, concerns, and faster rate raise expectations.
Finally, last night market started to realize the data and FED officials' comments about the rate raise. Last night NASDAQ closed 2/51% lower to test its lowest level since October 2021, SP500 lost 1.42%, Dow 30 also closed 0.49% lower. And in the last hours of the Asian season, all leading indices trading lower, including Nikkei nearby 2%, Hang Seng almost 1%, and Shanghai trading lower by 0.6%.
On the data front also, yesterday we had interesting numbers. US Initial Jobless Claims unexpectedly rose to 230,000 in the week ended January 8m which is the highest level in the past two months. With this increase, the four-week average also rose 6,250 to 210,750. However, the continuing claims at 1,559K, was much lower than the previous week with 1,753K and market expectations.
Following Wednesday's CPI data, December PPI data was also published on Thursday. December PPI hit a new low since November 2020 at 0.2%, to record 9.7% annually, which is slightly lower than the 9.8% of market expectation.
As a result in the market, the US dollar posted its biggest drop since May 2021, as the pandemic concerns ease, to lift the economic activity, causing more capital to flow out of the US dollar. And now, as I mentioned a few days ago, the US deficit gets more attention.
Besides all economic data, we had the hearing for the nomination of Lael Brainard, as the Fed vice-chair, and other FOMC members' speeches. Mrs. Lael Brainard believes that officials could boost rates even in March 2022 to limit inflation. Other FOMC members including Patrick Harker, and Charles Evan also support the rate hike, but they do not insist that it must be in March. Later today, New York Fed President John Williams will speak.
Interest rate hikes will lift the value stocks, as near-term cash flows can put the stocks a bit under pressure. Alpine Woods Capital Investors portfolio manager Sarah Hunt in the interview with Bloomberg told that “We are in a position where much that has been positive for equities is maybe moving to neutral or negative, and while there are still few alternatives, it makes the equity market ripe for more fluctuations over the next few months as we see how the data shake out and how the Fed reacts,”.
Today so far we had China trade data, which showed less import, and more export to increase the trade balance. Later today the UK GDP, industrial and manufacturing production, and later in the US season, US retails Sales and Industrial production to watch. On the earning season, Wells Fargo & Company (NYSE: WFC), Citigroup Inc. (NYSE: C), and JPMorgan Chase & Co. (NYSE: JPM) will also report their earnings.
As a general conclusion, we can say that these data in the short term can put the stock markets a bit more under pressure, but also increasing the rate hike expectation, can stop the US dollar's bears.
