- After a sharp jump in bond yields to start the year, rising rates could again set the tone for stocks next week.
- Big events include testimony from Fed Chairman Jerome Powell Tuesday and inflation reports on consumer and producer prices.
- The week also marks the beginning of the fourth-quarter earnings season, with big banks JPMorgan Chase, Citigroup and Wells Fargo reporting Friday.
The bond market could again set the course for the week ahead after rapidly rising interest rates gave stocks a choppy start to the new year.
In the coming week, key inflation reports are expected, and Federal Reserve Chairman Jerome Powell is slated to testify Tuesday at his nomination hearing before a Senate panel, while the hearing on Fed Governor Lael Brainard’s nomination to the post of vice-chair is set for Thursday.
The week also marks the start of the fourth-quarter earnings period with reports from major banks JPMorgan Chase, Citigroup and Wells Fargo on Friday.
“Inflation and the Fed continue to be the theme next week, but I do think we’re looking forward to having some earnings results to sink our teeth into,” said Leo Grohowski, a chief investment officer of BNY Mellon Wealth Management. “We do think it’s going to be a good quarter and a good year for earnings, which is why we’re generally upbeat on the prospect for earnings.”
Grohowski said the markets will focus predominantly on the Powell and Brainard hearings, the consumer price index on Wednesday and the producer price index the next day.
“I think it’s unrealistic to assume the earnings become the page-one story, and the Fed monetary policy becomes the page-two story,” he said.
Stocks had a rough first week to 2022, as bond yields rose on both high expectations for Fed interest rate hikes and the view that the omicron variant of Covid is heading for a peak in a matter of weeks. Yields move higher when bonds sell-off.
Tech was particularly hard to hit, with the Nasdaq Composite down 4.5% for the week, while the Dow was barely negative, down just 0.3%. The Technology Select Sector SPDR Fund was off 4.6% as of Friday afternoon. But banks moved higher on the prospect that rising interest rates would help earnings. The Financial Select Sector SPDR Fund was up 5.4% for the week.
The S&P 500 ended the week at 4677, down 1.9%.