Wall finally evaporated the recovery climate – All indices closed with strong losses

Their strong gains for most of the session were reversed by major Wall Street stocks, with the Nasdaq, after a temporary uptrend of up to 2%, finally moving deeper into technical correction (over -10% from historic highs of), with stocks struggling to adapt to an environment of higher bond yields and impending interest rate hikes.

On the dashboard, the industrial Dow Jones lost 313.26 or 0.89%, to 34,715.39 points, with the widest S&P 500 to lose 50.03 points or 1.10%, at 4,482.73 and the technological Nasdaq records a drop of 186.2 points or 1.30%, to 14,154 points.

The S&P 500 is marching for the third consecutive week of losses. The Dow has lost 3.3% since the beginning of the week, with the S&P 500 falling 3.9% and the Nasdaq hitting the hardest, with losses of 5%.

Peloton’s stock sank 23.9%, after the news that it is “temporarily slowing down” the production of interconnected fitness equipment, as demand weakens and the company wants to control its costs, which was transmitted by the CNBC network.

Technology stocks, such as those of Zoom Video and Tesla, initially led the market to recover, but by the end of the session they had lost their momentum. Netflix shares were moving in the “red” pending the quarterly results of the streaming giant.

A key factor that led the stock to reversal is to keep US government bond yields high, in anticipation of the Fed raising interest rates soon.

The meeting of the Fed’s monetary policy committee is scheduled for next week, with the market considering the possibility of interest rate hikes starting from January very small. Analysts’ convergent estimates already estimate four interest rate hikes of 25 basis points each in 2022.

The two-year US government bond yields at 1.04%, while the 10-year T-Bond at 1.84%.

“Rising new jobless claims and falling home sales are leading to a slight de-escalation in 10-year bond yields, reflecting a drop in expectations of how much the Fed can tighten monetary policy – so a 50-year growth scenario does not seem likely.” “Kathy Bostjancic, chief US economist at Oxford Economics, said in March. “In addition, greater volatility in the market is expected, mainly due to uncertainty in the areas of the economy, inflation and interest rates,” he added.

“Investors need to realize that the environment in 2022 will be much harsher,” said Ryan Detrick of LPL Financial. “With interest rate hikes approaching the historically record volatility in years of midterm elections in the United States, there may be more violent ups and downs this year,” he said.

Travelers, one of Dow’s 30 companies, exceeded analysts’ expectations for quarterly earnings and revenue, with its share up 3.2%, while American Airlines also exceeded estimates, but downgraded the guidance, with its share to record losses of 3.2%.

United Airlines shares fell 3.4% after the announcement of the company’s quarterly results, which announced that the Omicron wave is already affecting its bookings and will delay its recovery from the shock of the pandemic.

“The results announcement period is at a very early stage, but in general we seem to be facing another strong quarter for corporate America. Yes, with interest rates rising, we are dancing on a tightrope and some volatility makes sense, but the foundations “The economy remains strong enough.”

Data on new US unemployment benefits, which were announced earlier, also showed that Omicron is to some extent costing the economy recovery.

Among the 30 Dow shares, only 4 moved with a positive sign, while 26 with a negative one. The profits were led by those of Travelers Cos., Procter & Gamble, Goldman Sachs, while those losses of Dow Inc., Intel, Home Depot.

Macro

The number reached its highest level since October 2021 of new applications for unemployment benefits last week, according to figures released by the Ministry of Labor USA, suggesting that the outbreak of the Omicron pandemic has affected the US labor market.

In particular, new applications for unemployment benefits increased by 55,000 in the week ended January 15, climbing to 286,000 applications, from 231,000 a week earlier. It is noted that this is the highest number of new applications since October 16, 2021, when they were at the lowest level of more than 50 years.

Economists in a Dow Jones poll expected new unemployment benefit applications to reach the seasonally adjusted 225,000 applications.

The number of people already receiving unemployment benefits, meanwhile, also rose by 84,000 to 1.64 million Americans, according to the US Department of Labor, returning to pre-pandemic levels.

The latest data suggest that the wave of cases caused by the Omicron variant of the coronavirus has increased the number of Americans out of the labor market.

Nevertheless, the number of people losing their jobs is still extremely low and is likely to remain so, as companies find it difficult to find employees amid the worst labor shortages in decades and fierce competition for staff.

Significant improvement was also recorded by manufacturing activity in the Philadelphia area compared to the previous month, showing that businesses are still growing despite the outbreak of the Omicron variant and persistent shortages of manpower and supplies, according to data from the Federal Reserve Bank of Philadelphia.

In particular, the index rose by 8 points in January and rose to 23.2 points, from 15.2 points in December.

It is noted that economists in a Wall Street Journal poll expected an improvement in the index but at a slower pace, setting the bar at 18.6 points.

Nearly 31% of businesses surveyed by the Federal Reserve Bank of Philadelphia reported an improvement this month, and only 7% reported a deterioration, with the majority of businesses (60%) reporting that their business remained unchanged.

The index of current shipments also improved, by 6 points, reaching 20.8 points.

The index of new orders also showed a slight increase, which had fallen by 34 points in the previous month, as it increased by 4 points to 17.9 points in January. More than 36% of companies reported increases in their new orders, compared to 18% who reported reductions.

Overall, companies continued to talk about improving employment, but the index fell from 33.9 points in December to 26.1 points in January.

On a yearly basis, the sales of existing homes in the US, with the offer, which has fallen to record lows, excluding some of those who want to buy a home for the first time.

Home sales fell 4.6% on a seasonally adjusted basis in December compared to the same month in 2020, to 6.18 million units last month, with the decline being relatively symmetrical in all parts of the country. Financial analysts in a Reuters survey had forecast a decline to 6.44 million units.

Home resale, which accounts for the largest share of U.S. relative sales, fell 7.1% year-on-year in December. In total, 6.12 million homes changed hands in 2021, 8.5% more than in 2020.

The median home price in the US increased by 15.8% year on year in December, compared to the corresponding month of 2020, to $ 358,000. The average was $ 346,900, up 16.9% from a year earlier.

The average weekly work index decreased from 30.4 points to 9.6 points, which is the lowest measurement since September 2020.