Morning Minutes

Stocks Retreat as Investors Go Defensive




US index futures are down again this morning, falling between 0.2% for Dow Futures and 1.0% for NASDAQ futures, extending Friday’s US index losses of 0.1% to 1.0%. European markets are also under pressure this morning with the Dax down 0.5% and the FTSE falling 0.2%. Commodity action is mixed today. Natural gas is soaring 5.7% on a cold snap in consuming regions, but WTI crude oil is down 0.6% and copper is down 0.3%.

Currency market action suggests capital is still rotating out of risk markets and into defensive havens. Cryptocurrencies are getting pounded again with Bitcoin down another 3.5% and Ethereum down another 5.1%. The Japanese Yen is the top performing major currency followed by gold and the US Dollar which are advancing in lockstep both gaining 0.3% against the Euro today.

Investors remain concerned about the prospect of a more hawkish Fed this year, particularly the timing of interest rate hikes and the potential that after tapering is complete, the Fed could start to shrink its balance sheet. This could potentially be addressed at Fed Chair Powell’s semi-annual testimony to Congress which starts on Tuesday. US inflation reports Wednesday and Thursday may also give more color on how much pressure the US central bank is under to make hawkish moves. Friday’s US retail sales report may also be of interest, as it may indicate how much of an impact the Omicron Wave had on holiday season sales. The other main economic reports this week and Chinese inflation and trade numbers due midweek.

Earnings season kicks off on Friday with several big US Banks and senior Financials reporting. Until then, we are still in confession season (a time when struggling companies often put out profit warnings), which so far has been quiet for the most part, a potentially encouraging sign.

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Colin Cieszynski, Chief Market Strategist

Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

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