Monday Market Minutes: First Impressions Count

By Glenn Dyer | More Articles by Glenn Dyer

Two weeks into 2022 and already the tone of global commodity (see separate story) and share markets is looking very different to what we saw for much of last year.

Investors are more edgy, inflation and Fed-focused, worried about interest rates and the health of earnings, jumping at the odd shadow of ‘bad’ news when nothing is on the horizon – except Covid.

US stock markets will remain shut on today (Monday) because of a public holiday which means other markets, starting with those in Asia and Australia won’t have any real guide until late Tuesday night.

Friday saw the Dow slide 201.81 points, or 0.56%, to end at 35,911.81 as the rotation into value stocks stumbled. The S&P 500 inched up 0.08% to 4,662.85, while the tech-ladened Nasdaq outperformed with a 0.59% gain to close at 14,893.75

For the week, the Nasdaq shed 0.28%, while the Dow and S&P 500 lost 0.88% and 0.30%, respectively. Last week was the third negative week in a row for the Nasdaq but Friday’s rebound encouraged some analysts.

Besides the weakness last week with the US mark down, Eurozone shares fell 0.9%, Japanese shares lost 1.2% and Chinese shares fell 2%.

Despite Wall Street’s fall the overnight futures market on Saturday had the ASX 200 up 13 points at the opening today on the third trading week of 2022.

That was after Friday’s 1.08% fall, or 80.5 point, drop to 7,393.9.

The weak global lead weighed on the Australian share market which fell 0.8% with declines in retailers, tech and property stocks more than offsetting gains in resources (as iron ore prices rose sharply) as well as oil.

Omicron could be the bad news bear for markets but even that seems to be now steadying while the supply chain problems it is causing are having an impact, but not as bad as many analysts had feared.

China’s record trade performance in 2021 and again in December underlines how the supply chain fears are still a combination of Covid, skewed levels of demand, some shortages of key products such as computer chips, and bad organisation by many companies in the logistics chain in the US, Europe, Asia and the rest of the globe.

On top of this, Covid omicron has reminded companies, governments and investors that people – workers – still matter and without them, even the most automated of logistics systems and distribution chains fail.

Wall Street had its second negative week of the year in what is a fitful start. While earnings for the 4th quarter are projected to be up 23.1% from the final quarter of 2020, last week’s start (especially on Friday) wasn’t all that convincing for some investors.

Led by JPMorgan, major bank stocks stuttered after their earnings reports on Friday and with Bank of America, Goldman Sachs and Morgan Stanley due to release this week investors are watching for any repeat of the JPMorgan warning that its profitability may fall below medium-term targets.

That offset solid results from Citigroup and Wells Fargo. Morgan shares fell, those of Citi and Wells rose.

December’s retail sales in the US surprised with a fall of 1.9% for the busiest month of the year. That was the largest fall since February 2021, after rising 0.2% in November. Economists had forecast retail sales unchanged. The fall saw economists cut their forecasts for US 4th quarter and 2021 economic growth.

Sales could weaken further in January as omicron limits consumer traffic to places like restaurants and bars. Still US retail sales are a strong 19.2% above their pre-pandemic level.

Netflix’s 4th quarter and 2021 report late this week could very well set the tone for the rest of the December quarter reporting season, especially if Netflix subscriber numbers fall seriously short of forecast.

Long term bond yields were flat to up slightly. Oil, metal, gold and iron ore prices rose as did the $A, as the $US fell. The Aussie dollar fell 1% on Friday as the value rotation slowed.

The relative strength of commodity prices, resources stocks and the $A are positive for the ASX from a cyclical perspective, according to AMP Chief Economist Shane Oliver.

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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