The Market Today

Geopolitical Tensions High Ahead of Busy Week for Economic Data

by Craig Dismuke, Dudley Carter


This week’s economic calendar is packed with key reports throughout and a Fed decision on Wednesday.  The January Markit services and manufacturing PMIs will be released at 8:45 a.m. CT today.  Tomorrow will bring home prices and consumer confidence (Conference Board).  Data on trade, inventory, and new home sales, are scheduled for Wednesday, along with the Fed decision.  The first estimate of 4Q GDP is expected to show the economy expanded 5.3% on Thursday.  And Friday will bring personal income and spending, PCE inflation, the employment cost index, and another consumer confidence report (University of Michigan).


ICYMI – January 21, 2022 Weekly Market Recap: Treasury yields climbed early in the week to reach new cycle-highs across the curve by Wednesday, extending a surge that started on the first trading day of the new year. The 2-year yield broke above 1.00% for the first time since March 2020, climbing as high as 1.072%. The 5-year yield nearly reached 1.70% and the 10-year yield touched 1.90%. Rising rates have buffeted equities in January, a trend that continued as yields reached those peaks and persisted through the end of the week. A quiet economic calendar included mixed housing data, mixed regional manufacturing surveys, and disappointing jobless claims data. Corporate earnings remained in focus. Notably, several major U.S. banks reported larger-than-expected increases in compensation costs and Netflix, among the first tech companies to report, disappointed analysts’ expectations for subscriber growth. Tech continued to underperform broader indices, dragging the Nasdaq down 7.6% for the week and contributing to the S&P 500’s 5.7% slide, both notching their worst weekly performances since March 2020 and finishing below their 200-day moving averages. As equities faltered, Treasury yields pulled back Thursday and Friday. The 2-year yield closed 3.5 bps higher at 1.00% while the 5-year yield ended roughly flat at 1.56% and the 10-year yield slipped 2.6 bps to 1.76%. The spread between the 2-year and 10-year notes ended the week at 75 bps, its flattest level of the year. Click here to view the full recap.


Global Market Sentiment Struggles to Recover as Fed Decision Looms and Broader Uncertainties Remain Elevated: Global stocks continue to struggle Monday after selling off last week (more above) and Treasury yields have extended the late-week decline that distanced sovereign rates from cycle-highs reached Wednesday. Investors face a busy calendar of events this week, including key corporate earnings reports and the Fed’s latest policy decision on Wednesday. Adding to the overall cautious tone, recent tensions between Russia and Ukraine have grown, not abated. While oil prices have remained calm, European natural gas prices rallied nearly 20% amid the rising geopolitical risks. Stocks in Asia fell for a seventh time in the last eight trading sessions and Europe’s Stoxx 600 slumped more than 2% to hover near a three-month low. The most recent developments and concerns have occurred against a backdrop of pre-existing uncertainties tied to the impact of the Omicron case surge that sparked new restrictions across much of Europe. Despite stronger-than-expected results in Germany, the Eurozone’s advance PMI estimate for January dipped more than anticipated on weakness across the services sector. The shaky start globally undermined a potential recovery for U.S. markets. Nasdaq futures were down more than 1% before 7 a.m. CT, leading smaller declines of 0.7% and 0.4% for the S&P 500 and Dow. Treasury yields were mixed and more subdued overnight but moved lower early in U.S. trading. At 7:40 a.m. CT, the 2-year yield was down 1.0 bp and back below 1.00% while the 10-year yield fell 4.1 bps to below 1.72%, its lowest level since January 13.

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