The Federal Open Market Committee (FOMC) is expected to leave the interest rates alone. There will likely be a hint at a mid-March hike by .25%. The DOT plot will not be released this month. Real GDP is likely to have risen at an annual rate of 6%. I believe this is not sustainable. Will we grow, yet, but the rate of change will slow. The market seems to not like that slow down, like the economy. The personal income and spending numbers will be included in the GDP repot. December figures should shed some light on the degree of momentum we had heading into the first quarter of 2022.
The SP 500 is at a cross roads where if we start to close below 4450, we could see some lower prices. This week is the time to put some of that dry powder to work. $AMZN, $GOOG, $VTI. We got a decent pullback and in 5 years this market will not be here.
The first couple of days this week will be choppy while traders wait to see what the FED is going to do on Wednesday.
Happy Monday. Good Luck out there this week.
Global Spotlight
Russia awaits a written U.S. response as tensions over Ukraine rise. Following a Jan. 21 meeting with U.S. Secretary of State Antony Blinken, Russian Foreign Minister Sergei Lavrov said the United States had promised to provide a written response to Russia’s proposal on security guarantees in Europe by Jan. 30.
The Federal Open Market Committee meets. The Federal Reserve’s policy-setting committee will convene Jan. 25-26, and is expected to signal an increase in interest rates starting with the March 15-16 meeting and the beginning of reductions in the Fed’s balance sheet (aka quantitative tightening). Interest rate liftoff from the current range for federal funds of 0-0.25% will probably take the form of a 25-basis point increase, but a larger 50 bps rise cannot be ruled out given accelerating inflation.
Senegal holds contentious local elections. On Jan. 23, 550 municipalities will vote in the first elections since the eruption of large-scale protests against the Senegalese government’s treatment of opposition leaders in March and November 2021.
Honduran President-elect Xiomara Castro gets sworn in. U.S. Vice President Kamala Harris, who leads a Central America task force, and Assistant Secretary of State Brian Nichols will attend the Jan. 27 inauguration in an indication of increased cooperation between Honduras and the United States.
Italy appoints a new president. The Italian Parliament on Jan. 24 will start the process of appointing a new president with a series of secret votes that could last days. In recent weeks, former European Central Bank President and incumbent Prime Minister Mario Draghi suggested he would like to become president, an office he would stand a strong chance of winning considering his domestic and international prestige.
Stratfor.com
Economic Calendar
Briefing.com has a good U.S. economic calendar for the week. Here are the main U.S. releases.
Briefing.com
Last Weeks Numbers
Review Last weeks numbers here.
A face Ripper. Is the bottom being tested? Two things are driving this market.
- Fear of Fed Reserve tightening
- Slow down in the economy.
Existing Home sales fell last year down 8.3% YoY last December. This shows that people are choosing to stick where they are and not moving as much. Initial Unemployment claims for benefits rose by 55K last week. to 286,000. The Omicron variant seems to be the culprit.
Look at the Macro Market Section for my SP 500 Levels and chart.
Earnings
Source I/B/E/S data from Refinitiv
Aggregate Estimates and Revisions
- 21Q4 Y/Y earnings are expected to be 23.7%. Excluding the energy sector, the Y/Y earnings estimate is 15.6%.
- Of the 64 companies in the S&P 500 that have reported earnings to date for 21Q4, 76.6% have reported earnings above analyst estimates. This compares to a long-term average of 65.9% and prior four quarter average of 83.9%.
- 21Q4 Y/Y revenue is expected to be 12.4%. Excluding the energy sector, the growth estimate is 8.9%.
- During the week of Jan. 24, 104 S&P 500 companies are expected to report quarterly earnings.
Marco Market
OK, here we go. Last week was a face ripper, scared or are you ready to invest? Shown below, the SP 500 is down around 8.5%, which is in line with previous pull back from all time highs. One big difference is the speed at which this pull back happened. Last year the SP 500 had a 27% gain, with and averaged 16% over the last 5 years. So, this could be a breather for the market. The economy could catch up.
Here is what I am watching:
- The FED this year has indicated 3 rate hikes in response to the rising inflation.
- The FED has also indicated that it will accelerate the tapering of monthly bond buying in 2022.
- M2 Money supply will decelerate rapidly with the reduction of the manly purchasing.
These items will pressure the market as we have seen in the last few weeks.
According to Barchart, over the past month 8 stocks in the SP 500 made new highs where 235 have made new lows.
I think there is some good news. We are past options expiration, we have a positive earnings season coming, and the market is open for some bargain hunting.
- I like $AMZN below 3000.00
- I like $MSFT closer to 280.00
- I like $F closer to 18.00
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