Markets: The Nasdaq and S&P took an unexpected punch this week that sent them lower.
S&P roller coaster last week: up, down a touch, down significantly, down a touch, and down.
10-year: The U.S. 10-year treasury jumped +17% in the first week of the New Year.
Fed: The punch came from the minutes of the December FOMC meeting released Wednesday afternoon. The big news in the minutes was the Fed was looking to not only increase their interest rate (at least three hikes and maybe four) in 2022, but also reduce their balance sheet (which has grown to $8.7 trillion). Markets were prepared for the rate increases for the most part, but the news about the balance sheet (new info) startled them. Trading was really rough the final two hours Wednesday afternoon.
ISM: Their manufacturing index dropped more than was expected. The prior read came in at 61.1. The consensus was the index would drop to 60.5, but the actual number came in at 58.7. Their Services index dropped from 69.1 well below expectations down to 62.0. Remember: a number above 50 shows the economy is expanding. The key in these reports is not only the direction, but the amount they dropped. Next month’s report will tell us if a trend might be developing, or if the drop was a “one-off”.
Jobs: Friday morning delivered another huge miss on the jobs number. Coming off a disappointing number last month of only 210,000 jobs, expectations were for 400,000 for this month’s report. The ADP employment report had come in on Wednesday a touch over 800,000, so there was hope for a big result. The actual number came in at just 199,000.
Jobless claims: The weekly number came in at 207,000. The 4-week average is 204,000.
Radio: I shared with Bill the Things to Watch in 2022. Here’s the link: https://parker-wealth.com/bill-and-chris-podcasts/bill-and-chris-fri-1-7 . You can normally hear us most Fridays at 6:38a, 7:38a, and 8:38a on 1100AM.
Unemployment: In the prior report the U3 came in at 4.2%. Expectations were for that to drop a tick to 4.1%, but the actual number dropped to 3.9%. That was a positive surprise.
Focus of the week: Inflation. We’ll get the first updates of the year for the CPI (consumer) and the PPI (wholesale) indexes. Last month consumer inflation came in at 6.8%, and wholesale inflation came in at 9.6%.
Earnings season: Financials get it started. Some of the companies reporting this week: BlackRock, Citigroup, JPMorgan, Well Fargo.
Indicator focus: The Consumer Price Index, the first Beige Book of the year (Wed); the Producer Price Index, jobless claims (Thu); retail sales and industrial production (Fri).