Fed Could Whip Stocks Off

Key inflation reports should become public in the coming week. Federal Reserve Chairman Jerome Powell will testify Tuesday at his nomination hearing before a Senate panel. In contrast, the hearing on Fed Governor Lael Brainard’s nomination to vice-chair is set for Thursday.

The week also marks the start of the fourth-quarter earnings period, with reports from JPMorgan Chase, Citigroup, and Wells Fargo on Friday.

According to Leo Grohowski, a chief investment officer of BNY Mellon Wealth Management, inflation and the Fed resume to be the theme next week. Still, he thinks we’re looking forward to having some earnings results to sink our teeth into. He added that they believe it will be a good quarter and a good year for earnings, which is why there’s generally upbeat on the prospect for profits.

Grohowski said the markets would concentrate predominantly on the Powell and Brainard hearings, the consumer price index on Wednesday, and the producer price index the following day.

He said he thinks it’s unrealistic to consider the earnings become the page-one story. The Fed monetary policy becomes the page-two story.

Stocks Falling

Stocks had a rough first week to 2022, as bond yields increased on both high expectations for Fed interest rate hikes and the opinion that the omicron variant of coronavirus is heading for a peak in a matter of weeks. Yields move heightened when bonds sell-off.

Tech was tough to beat, with the Nasdaq Composite down 4.5% for the week. The Dow was barely negative, down only 0.3%. The Technology Select Sector SPDR Fund was off 4.6% on Friday afternoon. But banks moved higher on the possibility that rising interest rates would help earnings. The Financial Select Sector SPDR Fund was up 5.4% for the week.

The S&P 500 completed the week at 4677, under 1.9%.