Big Tech stocks are selling off so dramatically as a product of, ‘yes US rates are likely to go up further this year,’ but also as investors rotate into value and cyclical trades. A recent chorus of Fed speakers that have said they are open to raising interest rates in March, which means the possibility of 4 rate hikes this year is growing. Wall Street is trying to get a sense of how much growth is going to slow and the banks will start providing some insight on Friday.
Harker’s stance on inflation is that it is very high and very bad. Fed’s Brainard testified before the Senate and said the Fed is very focused on policy moves to quell inflation. With four FOMC voters now expecting to hike in March, financial markets can’t rule out it is possible that they could deliver five rate hikes this year.
Earnings on deck
Earnings season starts with the big banks and Wall Street expects some strong results. Investment banking should have strong M&A activity and everyone knows how well the IPO/SPAC markets performed. Loan activity is expected to moderate for JPMorgan, while edging higher for Bank of America and Citigroup.
Overall optimism is strong for corporate America to navigate through the omicron wave and remain upbeat about the second half of the year.
Price increases that suppliers charge customers moderated in December. The December producer price index rose 0.2% in December lower than the 0.4% estimate and a decline of the 0.8% increase seen in November. With China’s prices that suppliers charge also coming down, that could support the further cooling of pricing pressures in the US in the coming months.