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Dow Jones futures rallied slightly on Monday after a very challenging start to 2022. The risk of a more aggressive US interest rate hike due to high inflation raises concerns among buyers. However, despite this, it should be noted that the correction from the highs posted at the end of last year is not so terrible, and there is no reason for panic as the economy is full of strength, while the unemployment rate has almost returned to pre-crisis levels. Dow Jones futures were up 27 points, while S&P 500 and Nasdaq 100 futures remained largely unchanged.
As for Friday's trading, all three major stock indices dropped. The S&P 500 shed by 0.4%, notching the first four-day losing streak since September. The Nasdaq Composite fell by 0.9%, also posting losses for four straight days. The Dow Jones Industrial Average lost 4.81 points. The risk of an increase in interest rates has affected US Treasury yields as well. Ten-year Treasury yields exceeded 1.8%.
Investors are looking forward to inflation data to be released this week, as well as a confirmation hearing for Jerome Powell's renomination as Federal Reserve chair. As I noted above, inflationary pressures are the main threat to the growing stock market. The report is set to be published on Wednesday and the rate is expected to accelerate 7.1% on an annual basis. The release of the producer price index is scheduled for Thursday.
Powell will speak at the Senate hearing before the committee tomorrow. The hearing for Fed Governor Lael Brainard's nomination to the post of vice chair of the central bank is also due to take place on Tuesday. Both candidates are expected to be approved, but the hearings could provide more information on the future of US monetary policy. This suggests an additional spike in volatility. According to indications, sellers will take the lead.
Experts note that market participants are gradually shifting their focus to high-yielding stocks, abandoning shares with higher rates due to a tightening of monetary policy in the United States this spring. In its minutes released last week, the Fed made it clear that it could wind down its loose monetary policy more aggressively than expected. The likelihood that the central bank could hike interest rates four times in 2022 is roughly 50%, which is a more hawkish way.
The coronavirus pandemic is affecting employers and their outlook on the future.
There have been reports today that Citigroup will be the first major Wall Street agency to enforce a vaccine mandate by laying off inappropriate employees by the end of this month. "You are welcome to apply for other roles at Citi in the future as long as you are compliant with Citi's vaccination policy," the bank said in the memo. Citigroup staff who have not been vaccinated against COVID-19 by January 14 will be placed on unpaid leave and fired at the end of the month unless they are granted an exemption. Their last working day will be January 31.
Citigroup, the third largest bank in the United States by total assets and a major player in the global market, has the most aggressive vaccination policy for its employees. Competing banks, including JPMorgan Chase and Goldman Sachs, have told some unvaccinated employees to work from home, but none has yet gone as far as sacking staff.
S&P 500 technical analysis
The fact that the index had failed to somehow resist the bear market on Friday, preserved pessimistic sentiment. The focus of bears remains on the support level of $4,665. If the price fixes below this mark, the situation will become really challenging for buyers. A breakout of this range could drag the trading instrument down to the area of $4,611 and $4,551. Buyers need to recoup losses incurred last week. However, given the upcoming release of US inflation data, this will be a pretty difficult task. Only if the price breaks through $4,722, the index will have a chance of returning to the stronger resistance level of $4,772.
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