Monday January 10th

U.S. stock index futures moved lower early Monday after a rocky start to 2022 for equity markets as interest rates rise. Futures tied to the Dow Jones Industrial Average were down 82 points. S&P 500 futures slipped 0.5% and Nasdaq 100 futures dropped nearly 1%. The S&P 500 and Nasdaq Composite are coming off four straight days of losses, while the Dow has retreated in three consecutive sessions. The rough start to the year for stocks has come as interest rates have spiked. The benchmark 10-year Treasury yield was near 1.77% on Monday morning after ending the year near 1.51%. On Sunday, Goldman Sachs projected the Federal Reserve to hike rates four times in 2022, signaling that Wall Street increasingly expects the central back to get aggressive in an attempt to curb inflation. Investors readied for a big week that will include key inflation data as well as a confirmation hearing for Federal Reserve Chairman Jerome Powell. Earnings season also kicks off this week. The S&P 500 is expected to show a growth rate of 21.7%, which would be the fourth straight quarter above 20%, according to FactSet. Canaccord Genuity strategist Tony Dwyer said investors should be prepared for volatility in the opening months of the year but a strong earnings season could support the market. “Inflation is higher than expected, the Fed has signaled three rate hikes this year (the market has started to price in the possibility of four), the Omicron variant is again throwing global growth into question, and the supply-chain constraints remain an important issue,” Dwyer said in a note to clients. “Although the uncertainty surrounding these formidable challenges has created volatility, ultimately the market moves with the direction of [earnings per share], which should remain positive until money availability shuts down by the Fed becoming too tight.” The consumer price index is set for release Wednesday and is expected to show a year-over-year increase of 7.1%, according to Dow Jones estimates. The producer price index, which measures wholesale prices, is slated for Thursday. Powell is scheduled to testify Tuesday at his nomination hearing before a Senate panel, while the hearing on Fed Governor Lael Brainard’s nomination to the post of vice chair is set for Thursday. While both are expected to be confirmed, the hearings could provide key information about the future of monetary policy. Financial heavyweights JPMorgan Chase, Citigroup and Wells Fargo release quarterly results Friday. The three major stock averages all fell in the first week of the year. The S&P 500 slid 1.9% last week and the Nasdaq Composite dropped 4.5%. The Dow outperformed, fading just 0.3%. Stocks, particularly high-growth names, have struggled as interest rates jumped, especially after the Fed minutes released Wednesday showed central bankers discussing balance sheet reduction. “That hawkish surprise hit the broad markets on Wednesday but especially high-growth and high-[price-to-earnings] tech stocks, as the prospects of the Fed aggressively tightening are most negative for high-growth/high-PE names,” Tom Essaye of the Sevens Report said in a note to clients on Monday. Asia-Pacific markets traded mixed on Monday as investors kept an eye on the coronavirus pandemic and rising interest rates in the U.S. In South Korea, the Kospi index fell 0.95% to 2,926.72 while the Kosdaq declined 1.49% to 980.38. Chinese mainland shares rose, reversing earlier losses. The Shanghai composite was up 0.39% at 3,593.52 and the Shenzhen component added 0.44% to 14,406.97. Hong Kong’s Hang Seng Index rose 1.08% to 23,746.54 while Taiwan’s Taiex added 0.38% to close at 18,239.38. Japan’s markets are closed for a public holiday. Oil prices were largely steady on Monday as supply disruptions in Kazakhstan and Libya offset worries stemming from the rapid global rise in Omicron infections. Brent crude fell 13 cents, or 0.2%, to $81.62 a barrel, and U.S. West Texas Intermediate (WTI) crude was down 17 cents, or 0.2%, at $78.73 a barrel. Both contracts had risen around 50 cents earlier in the session. Gold prices edged higher on Monday despite U.S. 10-year Treasury yields hitting a two-year high, as traders hedged their positions against inflation and ongoing geopolitical risks. Spot gold was up 0.3% at $1,800.76 per ounce by 1148 GMT, recovering slightly from Friday when it hit its lowest since Dec. 16. U.S. gold futures rose 0.2% to $1,800.30.