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When 2022 began, stocks had a rough start with increased bond yields. Bond yields rose on high expectations for Fed interest rate hikes coupled with the alarming spread of the Omicron variant.
As a new week begins, inflation, rising rates, and major events within the Federal Reserve could cause a turnaround for stocks. As it stands, the bond market would most likely set the course for this current week again. This follows fast increasing interest rates at the beginning of the year, which gave stocks a rough start. Also, this week, there may be releases of inflation reports as scheduled. According to the schedule, the release date is on the 12th of January by 8:30 am.
Federal Reserve, Inflation, Others to Influence Stocks This Week
In addition to inflation and other ongoing events, the chairman of the Federal Reserve, Jerome Powell, would be testifying at his nomination before a Senate panel. The hearing would be on the 11th of January, ahead of the hearing on Fed Governor Lael Brainard’s nomination to the position of vice-chair slated for the 13th of January.
Furthermore, this new week marks the beginning of the Q4 earnings period with reports from banking giants like JPMorgan Chase & Co (NYSE: JPM), Wells Fargo (NYSE: WFC), and Citigroup (NYSE: C) in the past week.
The chief investment officer at BNY Mellon Wealth Management (NYSE: BK), Leo Grohowski, talked about how the Federal Reserve and inflation will continue to be the topic of discussion this week. Grohowski stated:
“Inflation and the Fed [Federal Reserve] continue to be the theme next week, but I do think we’re looking forward to have some earnings results to sink our teeth into. We do think it’s going to be a good quarter and a good year for earnings, which is why we’re generally upbeat on the prospect for earnings.”
The executive mentioned the events that the markets will focus on this week. In his opinion, they are the coming Powell and Brainard hearing with the consumer price index and the producer price index.
Bond Yields in 2022
When 2022 began, stocks had a rough start with increased bond yields. Bond yields rose on high expectations for Fed interest rate hikes coupled with the alarming spread of the Omicron variant. At the start of the year, tech stocks plunged, with the Nasdaq Composite shedding 4.5% in the first week. As of Friday afternoon, the Technology Select Sector SPDR fund went down 4.6%. As the week ended, the S&P 500 closed down 1.96% to 4677. Grohowski said:
“This week was a wake-up call for what we’re going to be dealing with for 2022. Lower returns and more risk. Welcome to the new year.”
The wavy move of the benchmark 10-year was a concern for investors. The 10-year period climbed from 1.51% at the end of 2021 to 1.80% on Friday. Wells Fargo revealed that it was the second-biggest move in the yield for the first week of the year in the past 20 years.