The Markets (as of market close January 21, 2022)

Volatility has engulfed the markets this month and is showing no signs of letting up, impacted by a more hawkish Federal Reserve stance, economic disruptions from Omicron, and risks to company profits due to rising costs. Fourth-quarter 2021 corporate earnings season has begun with uneven results so far. Inflation continues to hover over investors as they anticipate a bump in interest rates for the first time in three years, with the first increase likely coming in March. Demand for 10-year Treasuries has driven prices higher, sending yields lower for the first time in five weeks. With last week’s losses, both the Nasdaq and the Russell 2000 have declined nearly 12.0% in January. The Nasdaq is in correction territory, down over 10.0% from its November peak, hitting its lowest level since June 2021.

Wall Street continued its January swoon last Tuesday, falling lower to start the holiday-shortened trading week. The Nasdaq dropped 2.6%, recording its lowest close since October.

The slide continued for stocks last Wednesday. Each of the major benchmark indexes lost value. The Nasdaq extended losses, dropping more than 10.0% from a November high, falling into correction territory.

Higher-than-expected jobless claims didn’t help investor confidence, as equities dipped lower again last Thursday. Dip buyers sent stocks higher earlier in the day, but the rally did not last as each of the major benchmark indexes gave back any gains to close in the red.

Stocks fell again last Friday, with tech shares leading the sell-off following shaky corporate earnings data. The S&P 500, which slid 1.9%, closed below its 200-day moving average for the first time since 2020. The Nasdaq dropped 2.7% and the Russell 2000 lost 1.8%. The Dow (-1.3%) and the Global Dow (-1.6%) also ended the day in the red. Ten-year Treasury yields, the dollar, and crude oil prices also declined to end the week.

Eye on the Week Ahead

There’s plenty of economic news to watch for this week. The first estimate of the fourth-quarter 2021 gross domestic product is out. The economy advanced at an annualized rate of 2.3% in the third quarter, well off the 6.7% growth rate in the second quarter. The December figures on personal income and spending are available this week. Personal income rose 0.4% in November, consumer spending advanced 0.6%, while prices for consumer goods and services climbed 0.6% for the month and 5.7% since November 2020. Aside from these important economic reports, all eyes will be focused on the Federal Reserve, which meets this week. It is expected that the Fed will continue to address rising inflation by further reducing stimulus and projecting interest-rate increases beginning this March.

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The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 largest, publicly traded companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. The U.S. Dollar Index is a geometrically weighted index of the value of the U.S. dollar relative to six foreign currencies. Market indexes listed are unmanaged and are not available for direct investment.