Week of January 31, 2022

Another turbulent week in the U.S. equity market ended with a solid rally last Friday.  On the day, the S&P gained 2.4%, the Dow finished up 1.7% and the ever-volatile technology sector helped the NASDAQ jump 3.1%.  As of last Thursday, the S&P 500 was on track to post its fourth losing week in a row.  On the week, the Dow and S&P 500 gained 0.8% and 1.3%, respectively, while the NASDAQ finished up 0.01%.  Despite the small gains, the Dow and S&P 500 are on track for their worst months since March 2020, and the NASDAQ is on pace for its worst month since October 2008.

The markets were roiled last week as investors weighed inflation, expected interest rates hikes by the Federal Reserve, quarterly earnings reports, and the ongoing pandemic. Anytime the Fes is going from really easy (money) to starting to tighten, there’s always uncertainty, but this has been a stomach-churning week, said Fargo’s Scott Wren.

The Federal Open Market Committee indicated last week an increase in interest rates could come as soon as at its mid-March meeting.  Some investors are concerned about the potential impact on the economy and the labor markets, especially as the economy is still recovering from the recent COVID-19 omicron variant.  Fed Chair did comment, however, “there’s room to raise interest rates without threatening the labor market.”  The Department of Labor’s monthly jobs report is due for release this Friday and will provide an updated look at the strength of hiring and labor force participation.

Some encouraging news last week, government data showed U.S. economic growth, measured by gross domestic product (GDP), rose by 6.9% in the 4th quarter of 2021, surpassing an Econoday consensus estimate of 5.7% growth and following a 2.3% increase in the 3rd quarter.