THE WEEK ON WALL STREET
A hot inflation print and the growing concern of a Russian invasion of Ukraine sent stocks tumbling late in the week, leaving major indices lower for the five-trading days.
The Dow Jones Industrial Average skidded 1.00%, while the Standard & Poor’s 500 retreated 1.82%. The Nasdaq Composite index slumped 2.18%. The MSCI EAFE index, which tracks developed overseas stock markets, advanced 2.26%.1,2,3
A DOUBLE WHAMMY
Mid-week, a fresh batch of positive corporate earnings surprises lifted investor sentiment, helping stocks claw back losses with technology stocks posting some of the sharpest gains. But January’s inflation report, set for release on Thursday morning, remained investors’ biggest concern.
When the report hit, it showed accelerating inflation, and stocks dropped and bond yields bounded higher. Stocks managed to recover from the initial reaction to the unexpectedly high inflation number. But when the President of the Federal Reserve Bank of St. Louis commented that the Fed may consider a more aggressive move against inflation, stocks resumed their slide lower. The stock skid accelerated into Friday on White House reports that an invasion of Ukraine by Russian forces may be imminent.4
INFLATION SIZZLES
Prices of consumer goods accelerated in January, rising 0.6% from the previous month and 7.5% year-over-year. This annual inflation rate was the highest since 1982. Core inflation, which excludes the more volatile food and energy prices, was 6.0% higher from last January.5
Many economists and market analysts had expected inflation to moderate, but driven by a surge in prices of used cars, gasoline, and energy, inflation remained at elevated levels. The persistence of inflation at these heights has fueled investor concerns that the Fed might consider a more aggressive 50-basis points increase in short term interest rate.
BY THE NUMBER$
NO GASOLINE NEEDED - Electric vehicle sales globally increased by +112% in calendar year 2021, rising from 3.0 million to 6.3 million worldwide (source: Benchmark Mineral Intelligence).
CREDIT TECHNOLOGY - An average American worker has increased his/her productivity by +52% in the last 22 years, i.e., an average worker can complete in 1 hour, 58 minutes as of 12/31/2021 the same amount of work that it took him/her 3 hours to finish as of 12/31/1999 (source: Department of Labor).
STATE-BY-STATE - The unemployment rate in 12 of the 50 US states dropped to their lowest levels ever in December 2021 based on statewide data tracked since January 1976. The 2 states with the lowest jobless rate were Nebraska (1.7%) and Utah (1.9%). California’s 6.5% jobless rate is the highest in the nation as of December 2021 (source: Bureau of Labor Statistics). 6
THE WEEK AHEAD: KEY ECONOMIC DATA
Tuesday: Producer Price Index (PPI).
Wednesday: Retail Sales. Industrial Production. FOMC Minutes.
Thursday: Housing Starts. Jobless Claims.
Friday: Existing Home Sales. Index of Leading Economic Indicators.
Source: Econoday, February 11, 2022
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.
THE WEEK AHEAD: COMPANIES REPORTING EARNINGS
Tuesday: Zoetis, Inc.(ZTS), Devon Energy Corporation (DVN), Marriott International, Inc. (MAR), ViacomCBS, Inc. (VIAC).
Wednesday: Nvidia Corporation (NVDA), Cisco Systems, Inc. (CSCO), Applied Materials, Inc. (AMAT), Shopify, Inc. (SHOP), DoorDash (DASH).
Thursday: Roku, Inc. (ROKU), Walmart, Inc. (WMT), The Southern Company (SO).
Friday: Deere & Company (DE).
Source: Zacks, February 11, 2022
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.
THE WEEKLY RIDDLE
What is the smallest number of cars that can be driven down the road in this formation: two cars ahead of a car, two cars behind a car, and a car between two cars?
LAST WEEK’S RIDDLE: They never move, even when we walk on them, but signs and arrows may indicate that they go “up” and “down.” What are they?
ANSWER: Stairs.