US stocks open in decline with inflation and balance sheets on the radar

As this second week of trading begins, the US market is eagerly awaiting inflation data and the start of the fourth quarter balance sheet season.

The Dow Jones opened this Monday (10) with a drop of 0.35%, to 36,116 points, the S&P 500 fell 0.72%, to 4,643 points and the Nasdaq was operating at a low of 1.20X%, to 14,758 points .

In the first week of the year, the main indices fell on news that the Fed (Federal Reserve, Central Bank of the United States) could raise the interest rate in the short term in March.

According to The Wall Street Journal, low interest rates make room for investors to be more willing to pay for shares. “[Mas], now that inflation is soaring, potentially causing the multiples to contract even further, investors are rethinking their game plans. This means that earnings growth will be critical for the market to continue its ascent.”

The US inflation data will be released next Wednesday (13). The newspaper also pointed out that the market believes that the monthly consumer price must have risen by more than 7% compared to the previous year – a move that has not taken place since 1982.

The first releases of financial results will come from freight giant JB Hunt Transport Services, consumer products company P&G and oil company Baker Hughes.

According to the FactSet, analysts estimate that 22% of the S&P 500 companies saw an increase in profit between October and December compared to the same period in 2020.

Omicron

Ômicron is also on investors’ radar. Americans want to know how companies plan to run companies amid the growth of cases of the new variant.

US infectious disease specialist Anthony Fauci warned on Wednesday (5) against complacency with the Ômicron variant of the new coronavirus, saying the large number of cases could overwhelm hospitals, despite signs of lesser severity.

The impressive pace of Ômicron’s spread has complicated life across the country by affecting restarting school after the holiday, interrupting air travel, closing entertainment venues and disrupting plans to return to offices.

The average number of new covid-19 cases over seven days in the United States reached 540,000, a new peak for the eighth consecutive day on Tuesday. Hospitalizations of covid-19 patients have increased by 45% over the past seven days to more than 111,000, a number not seen since January 2021.

In attention

Os iInvestors still reflecting the harsher tone of the minutes of the American Monetary Policy Committee (Fomc) and the strong US employment data (payroll) last week.

“The ‘hawkish’ tone of the minutes of the Fomc (Federal Open Market Committee) suggests that the central bank is concerned about inflation,” Nancy Davis, founder of Quadratic Capital Management, told Reuters.

“We believe the Fed will likely be more prudent and take longer than the market expects to assess the economy before starting a cycle of higher interest rates and a balance sheet reduction plan,” he added.

The minutes and the payroll indicate that interest rates may rise faster in the United States, given high inflation and the heated job market. High interest rates detract from the attractiveness of stock exchanges, hence the weak performance of the indices throughout the first week of the year.

*With Agência Brasil and Reuters