The US Federal Reserve and the quarterly results from Apple and Tesla – which could end up feeding off each other – will dominate markets this week .
In Australia it’s inflation tomorrow with the December quarter Consumer price Index being released and forecast to show a small rise in headline costs to 3.1%, according to the AMP’s chief economist, Shane Oliver with a quarter-on-quarter rise of 0.9% and a rise in the annual underlying rate of 2.4%.
Apple will have to produce a fabulous quarterly report on Thursday to keep the US earnings season on track after Netflix blew it off course with a weak subscriber outlook.
Friday saw Wall Street end its worst week since 2020, with big losses in technology and consumer discretionary names. Netflix shares plunged more than 22% on Friday and are off more than 33% since the start of the year.
Traders are watching to see whether the same fate will take down other big tech names this week like Apple, Microsoft and Tesla, streamers and media stocks such as Comcast and giant telcos like AT&T and Verizon.
It was a painful week on Wall Street, with the Nasdaq slumping 7.6% for the week, its worst performance since March, 2020. The S&P 500 ended the week at 4,397, down 5.7%, and is now 8.7% from its January 4 high.
The Nasdaq has fallen 15.5% from its high and is off to its worst start to the year, through the first 14 trading days, since 2008, according to FactSet.
The Federal Reserve meets Tuesday and Wednesday against that highly unsettled background and fears about its looming decision on rates and stimulus dominates market thinking.
That is making for an extreme febrile background for the Fed meeting – the market fears are raising Volatility, especially in the growth sector and tech stocks in particular.
Economists still expect the Fed to lift rates by a quarter-percentage-point at its March meeting, but a rise this would wouldn’t surprise. At best traders think there will be a big signal on the timing for the rise at this week’s meeting.
On top of that there’s the first estimate of 4th quarter GDP on Thursday (with economists thinking a 5% to 6% annual rate of growth). Friday also sees the personal consumption expenditures data, which includes the Fed’s preferred inflation measure (so-called PCE inflation). A rise to nearly 5% is tipped by economists.
Tonight sees the release of the early surveys of business activity in many major economies – Australia, Japan, parts of Europe and the US.
These are likely to show a fall on the back of Omicron disruptions, especially in the US where home price data for November and the latest consumer confidence data will be released.
The flow of December quarter earnings will start to speed up – consensus earnings expectations have now increased to and annual 21% (half the rate of growth in the September quarter).
Besides the techs reporting this week, energy majors Chevron and Exxon Mobil are down to release December and 2021 results on Friday and could help lift average earnings across the S&P 500 to around 26% from the 21% estimate from Factset.
Nearly half the Dow 30′s companies are due to report this week – including 3M, IBM, Intel, Caterpillar, American Express, Chevron, Apple, Microsoft, Boey, Visa and Mastercard.
The Fed meeting and the PCE inflation report will ensure costs and interest rates will remain on the agenda for all of this week.
Corporate results for the December 31 half year or quarter will be released elsewhere this week, making for a busy reporting period. South Korea’s 4th quarter GDP will be released, as well as the same from Taiwan.
Singapore inflation will be released as well.
