MidWeek Commentary

HI Market View Commentary 01-24-2022

HI Market View Commentary 01-24-2022

What a day !!!  So what happened?

God placed the best things in life on the other side of fear and adversity

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The Big Picture

Last Updated: 21-Jan-22 15:05 ET

Potential for negative surprises is inflated – like wages

2022 has not gotten off to a good start. The Nasdaq has suffered a correction, which is loosely defined as a 10% pullback from a prior closing high. The Russell 2000 has flirted with a bear market, which is loosely defined as a 20% pullback from a prior closing high. The S&P 500 and Dow Jones Industrial Average both fell below their 200-day moving averages.

A rush to buy every dip in 2021 has been supplanted by an inclination to sell into strength in 2022.

The 10-yr note yield went from 1.51% to 1.90% in just 11 trading sessions. The fed funds futures market, which only a month ago thought three rate hikes in 2022 was a close call, is now projecting four rate hikes in 2022. Furthermore, there has even been some chatter that the Fed will raise the target range for the fed funds rate by 50 basis points at the March meeting to try to regain some inflation-fighting credibility.

As a reminder, the target range for the fed funds rate is at the zero bound while the consumer inflation rate of 7.0% sits at a 40-year high.

That inflation has been driven by higher prices for goods and services, which have been exacerbated by supply chain problems, transportation bottlenecks, and underinvestment. In due course, another inflation driver should avail itself as a problem: wage inflation.

On the Up and Up

Wages are going up. That is being heard anecdotally just as easily as it is being seen objectively.

Goldman Sachs CEO David Solomon captured the reality well on his company’s earnings conference call, saying “There is real wage inflation everywhere in the economy, everywhere.” He said this after the bank reported much higher than expected compensation expenses that led to an earnings miss and a year-over-year profit decline.

Shares of GS declined 7.0% the day of its report.

It is not a bad thing that wages are increasing. It can become a bad thing for the stock market, however, if that wage inflation cuts into profit margins and/or leads to higher prices (i.e., inflation) to protect profit margins.

We’ve Got Issues

Something a lot of new arrivals to the market might need to get acquainted with is the understanding that earnings ultimately drive the stock market. If profit margins are expanding, there will be an allowance to pay more for every dollar of earnings. If they are contracting, investors won’t pay as much for earnings growth that is either decelerating or declining because of the margin pressure.

That’s one issue.

Some — perhaps many — companies will be successful in passing along their higher labor costs in the form of higher prices for their goods and services. These companies would benefit from an expansion in profit margins, assuming customer demand holds steady or even increases.

This is the other issue.

If more and more companies are looking to offset higher compensation expenses with higher prices for their customers, there is going to be wage-based inflation pressures that are apt to prove stickier since employers aren’t going to start cutting wages when their competitors aren’t, lest they accept the risk losing a bunch of employees.

This stickier wage push inflation will be an added component that compels the Fed to keep aggregate inflation pressures in check with higher interest rates.

We are at this crossroads now, only there isn’t a good turn in any direction.

Individual companies reporting profit margin pressures during the Q4 reporting period are going to be penalized (and have been penalized), whereas the broader market is going to be penalized by a more aggressive Fed that sees a risk of wage-based inflation pressures leading to more persistent inflation.

It’s somewhat of a lose-lose position or at least a position that is going to make multiple expansion much harder to come by in 2022. Companies are literally going to have to earn their way this year, which is why many of the profitless story stocks of 2021 risk being left further behind in 2022.

What It All Means

The Q4 earnings reporting period is about to go throttle up. There have been some early warning signs that it could be a more challenging reporting period — certainly in relation to recent reporting periods.

That might sound ridiculous against a backdrop that includes an estimated blended earnings growth rate of 22.8%, according to FactSet. It resonates, though, in the understanding that it will be the slowest earnings growth rate since the fourth quarter of 2020 and precedes a quarter where earnings growth is projected to be just 6.2%.

It also resonates knowing the Fed is on the verge of increasing its policy rate at a time when labor supply remains tight, necessitating higher wages to attract and retain skilled workers, oil prices are at a 7-year high, and supply chain improvement has been impeded by the Omicron variant.

We should be hearing a lot about higher costs for corporate America, ranging from raw materials to transportation to packaging to labor. We don’t expect to hear a lot about anticipated cost relief in the first half of the year nor do we expect companies to project a lot of confidence in their forecasting ability for the full year.

The element of positive surprises this reporting period is unlikely to be what it used to be while the potential for negative surprises, not so much in the actuals reported for Q4 but the guidance for Q1, is inflated — like wages.

Patrick J. O’Hare, Briefing.com

Market Recap
The S&P 500 index slipped 0.3% last week, marking its second weekly drop in a row, as investors traded cautiously at the start of the Q4 earnings reporting season. The market benchmark ended the week at 4,662.85, down from last Friday’s closing level of 4,677.03. The index is now down 2.2% for the year to date following a 27% jump in 2021. The decline for 2022 thus far has come amid concerns about inflation and the COVID-19 pandemic. While the pandemic has been going on for two years, the US recently has been setting new record highs in daily case counts due to the spread of the highly contagious omicron variant. This has contributed to recent staffing and supply-chain issues. As the Q4 earnings season begins, investors are looking to see how US companies coped with the inflation, staffing and supply-chain issues last quarter. They also will be paying close attention to the companies’ outlooks. Some of the season’s early reports have added to investors’ concerns. Delta Air Lines (DAL) swung to a Q4 profit that topped analysts’ estimates, but the US airline expects to record a loss in the current three-month period with the omicron variant of COVID-19 impacting its short-term outlook. JPMorgan Chase’s (JPM) Q4 earnings per share surpassed analysts’ mean estimate but fell from the year-earlier period while its revenue not only declined year over year but also missed the Street consensus estimate. By sector, real estate had the largest percentage drop last week, down by 2%, followed by a 1.5% slip in consumer discretionary, a 1.4% fall in utilities and a 0.8% decline in financials. Still, two sectors managed to gain. Energy jumped 5.2% and communication services rose 0.5%. The real estate sector’s decliners included shares of Extra Space Storage (EXR), whose shares fell 2.3% on the week. A release earlier last week said the company sold 16 self-storage facilities across 12 US states to Rosewood Property for an undisclosed sum. The stock decline also came as the real estate investment trust’s shares were downgraded to hold from buy by Jefferies, which cut its price target on the shares to $223 from $229. In the consumer discretionary sector, shares of Domino’s Pizza (DPZ) shed 7% as Oppenheimer cut its price target on the pizza company’s stock to $550 per share from $565. The firm noted investors have been hoping for a same-store-sales boost if management raised price points on its national value platform. However, “this coveted tailwind now appears unlikely,” Oppenheimer analysts said in a note to clients following a presentation Domino’s management gave at a conference. The energy sector’s climb coincided with a continued advance in crude oil futures as investors have been betting demand will rise after new infections from the COVID-19 omicron variant peak. The US Energy Information Administration on Wednesday said US oil inventories fell for the seventh-straight week, dropping by 4.5 million barrels, which was greater than expected and added to the buoyant demand outlook. Among the energy sector’s gainers, shares of APA Corp. (APA) jumped 12% last week while Hess (HES) added 6%. Markets will be closed on Monday for the Martin Luther King Jr. Day holiday. When it reopens Tuesday, investors will see earnings reports from companies including Bank of America (BAC) and Goldman Sachs Group (GS). Wednesday’s reports are expected to include Procter & Gamble (PG), Alcoa (AA) and United Airlines Holdings (UAL). Thursday’s list features Union Pacific (UNP) and Netflix (NFLX) while Friday will bring reports from Schlumberger (SLB) and Huntington Bancshares (HBAN). Economic data being released next week will include some regional January data, including the Empire State Manufacturing Survey on Tuesday and the Philadelphia Fed manufacturing survey on Wednesday, as well as housing data including December building permits and housing starts on Wednesday and December existing home sales on Thursday. Provided by MT Newswires

Where will our markets end this week?


DJIA – Bearish

SPX – Bearish

COMP – Bearish

Where Will the SPX end January 2022?

01-20-2022           -5.0%

01-20-2022           -3.0%

01-10-2022           -3.0%


Mon:          HAL, IBM, ZION

Tues:          MMM, AXP, GE, JNJ, RTX, COF, MSFT, TXN, LMT, VZ

Wed:          ABT, T, FCX, GD, HES, KMB, INTC, LVS, TSLA, WHR, BA

Thur:         ALK, MO, IP, MA, MCD, MUR, NUE, LUV, VLO, BZH, JNPR, WDC, AAPL, V,

Fri:             ALV, CAT, CVX, CL, PSX, VFC

Econ Reports:


Tues:          FHFA Housing Price Index, S&P Case Shiller, Consumer Confidence,

Wed:          MBA,  New Home Sales, FOMC Rate Decision,

Thur:          Initial Claims, Continuing Claims, GDP, GDP Deflator, Durable Goods, Durable ex-trans, Pending Home Sales,.

Fri:             Employment Cost Index, PCE Index, PCE Core, Personal Income, Personal Spending, Michigan Sentiment

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Long put protection has been added to certain stocks


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‘Double down’ on defense because stocks will plunge another 10%, Morgan Stanley’s Mike Wilson warns

Stephanie Landsman

Investors may be playing with fire.

According to Morgan Stanley’s Mike Wilson, the S&P 500 is vulnerable to a 10% plunge despite Monday’s late buying binge. He warns investors are dangerously downplaying a collision between a tightening Federal Reserve and slowing growth.

“This type of action is just not comforting. I don’t think anybody is going home feeling like they’ve got this thing nailed even if they bought the lows,” the firm’s chief U.S. equity strategist and chief investment officer told CNBC’s “Fast Money.”

Wall Street hasn’t seen an intraday reversal this large since the 2008 financial crisis. During Monday’s session, the Nasdaq bounced back from a 4% drop while the Dow was off 3.25% at its low. At one point, the blue chip index was down 1,015 points. But by the close, the Nasdaq, Dow and S&P 500 were all in positive territory.

Wilson, the market’s biggest bear, expects the painful drop will happen within the next three to four weeks. He anticipates challenging earnings reports and guidance will give investors a wake-up call regarding slowing growth.

“I need something below 4,000 to get really constructive,” said Wilson. “I do think that’ll happen.”

His strategy: Double down on defensive trades ahead of the predicted setback. He warns virtually every S&P 500 group will see more trouble due to frothiness and is making decisions on a stock by stock basis.

“We’re not making a big bet on cyclicals here like we were a year ago because growth is decelerating. People got a little too excited on these cyclical parts of the market, and we think that’s wrong-footed,” he said. “There’s going to be a payback in demand this year. We do think margins are a potential issue.”

Wilson doubts the Federal Reserve’s two-day policy meeting which kicks of Tuesday will provide meaningful comfort to investors.

“They’re not going to back off because the market sold off a bit here,” Wilson said. “The data really hasn’t been soft enough for them to stop the tightening process.”

On Monday, the S&P 500 closed at 4410.13, 8.5% below the index’s all-time high hit on Jan. 4. Wilson’s year-end price-target is 4,400.

CNBC’s Robert Hum contributed to this report.


Here’s why stocks are on such shaky ground to start January


Maggie Fitzgerald@MKMFITZGERALD

It was a wild day for stocks on Monday, adding to the market’s shaky start to 2022.

The Dow Jones Industrial Average fell as much as 1,000 points, before coming back to close about 100 points higher. The S&P 500 was off by nearly 4% at its session low but managed to eke out a small gain. The Nasdaq Composite rose 0.6% after falling as much as 4.9%.

Despite the late-day jumps, both the Dow and S&P 500 are on pace for their worst month since March 2020, when the market fell into turmoil amid the pandemic. The Nasdaq, meanwhile, is still headed for its biggest one-month loss since October 2008.

What’s behind the market’s weak start to the year?

Though some areas of the market considered more expensive or speculative began to struggle in November, the broader market took a big step back during the first week of January following increasing hints from the Federal Reserve that the central bank will take aggressive action to slow down the jump in consumer prices.

“Over the past month, the Federal Reserve (Fed) has made it increasingly clear that it is serious about fighting that inflation,” the Wells Fargo Investment Institute said in a note to clients on Jan. 19.

The central bank has signaled that it plans to stop its asset purchases, hike rates and possibly reduce its balance sheet, starting in March. Government bond yields have surged in preparation for the rate increases, with the U.S. 10-year Treasury rising more than 40 basis points this year alone to nearly 1.9% at its high point after finishing last year just above 1.5%. (1 basis point equals 0.01%.)

Investors are now expecting four rate hikes this year, with some officials warning that more may be needed, after most Wall Street pros expected just one or two hikes a few months ago.

“The Dec. 15 minutes that came out on Jan. 5, they were a shock to investors,” Ed Yardeni, founder of Yardeni Research, said on CNBC’s “Halftime Report” on Monday.

The Fed will give its latest update on Wednesday. While it’s unlikely to raise rates at this meeting, market experts believe the central bank will stick with its plan tighten financial conditions despite the market decline given the high level of inflation.

Concerns about persistent inflation, supply chain disruptions from new Covid variants and the potential for conflict in Ukraine are other factors that have weighed on the risk appetites for investors.

Tech leads the way down

Technology stocks with high valuations got hit first and are continuing to get hit.

Last week, the technology-focused Nasdaq Composite fell into correction territory, marking a 10% drop from its November 2021 record close. At one point on Monday, the index was just a few percentage points away from reaching a bear market.

Nasdaq falls deeper into correction

chart logo Climbing bond rates typically disproportionally punish growth stocks as their future earnings growth become less attractive as rates rise. The growth expectations for tech stocks have also weakened as Wall Street analysts have gotten a better sense of what the post-pandemic economy may look like. “Since the end of 3Q21, 2022 earnings estimates for [the Nasdaq 100] fell 0.8%, while estimates for the S&P 500 rose 1.9%, indicating weaker fundamentals for Growth stocks relative to the overall market,” Bank of America equity and quant strategist Savita Subramanian said in a note on Monday. Many of the biggest stocks in the market are tech names, so their declines can have a major impact on market averages. Now, the selling pressure is feeding on itself as investors dump risk assets, dragging every stock sector but energy down in January. The cryptocurrency market has been hit hard as well. The price of bitcoin fell briefly below $34,000 on Monday morning, bringing its year-to-date losses to roughly 30%. Since its record high in November, the largest cryptocurrency has lost about 50%. Bitcoin has lost roughly 50% since its all-time high in November.

Bitcoin has lost roughly 50% since its all-time high in November.


The price of ethereum has seen a similar decline over that time period.

Bright spots

To be sure, the health of the economy is looking good. The unemployment rate has fallen to 3.9% after a record year of nonfarm payrolls growth. Other metrics of economic growth are positive, even if they show a slower recovery than in 2021.

Earnings season is also turning out to be a strong one, despite some disappointing reports from high-profile firms. More than 74% of S&P 500 companies that have reported results have topped Wall Street’s earnings expectations, according to FactSet.

Covid-19 cases are also coming down. After exploding to staggering new highs amid the spread of the highly transmissible omicron variant, Covid-19 cases started to come down in New York State over the last two weeks, according to Gov. Kathy Hochul, leading to hope that other areas of the U.S. can see a similarly quick wave.

-CNBC’s Michael Bloom contributed to this report.


MercadoLibre Doubles Down on Crypto With Two Purchases

Vinícius Andrade

Fri, January 21, 2022, 7:45 AM·1 min read

MercadoLibre Doubles Down on Crypto With Two Purchases


(Bloomberg) — Latin American e-commerce powerhouse MercadoLibre Inc. is deepening its presence in the crypto world.

The company acquired shares of 2TM Participacoes SA, the Softbank Group Corp.-backed owner of the biggest cryptocurrency brokerage based out of Brazil, MercadoBitcoin.com. MercadoLibre also said it made a strategic investment in New York-based Paxos, a blockchain company that it had worked with to offer crypto investments to some clients.

It’s the latest move by the e-commerce and fintech firm as it expands its crypto footprint. Starting last year, Brazilian customers of the Buenos Aires-based firm are allowed to buy, sell and hold cryptocurrencies using their digital wallets, with plans to replicate the product in other Latin American markets.

The company’s treasury has made purchases of Bitcoin, and Marcos Galperin, its co-founder and chief executive officer, is among those who have been vocal about the potential of opportunities around cryptocurrencies.

Bitcoin and other digital assets have been seen by some as potential hedges against swings in other areas of the financial market. The Bloomberg Galaxy Crypto Index is down 19% this year, after soaring to an all-time high last November.

MercadoLibre didn’t disclose the value for either of the transactions. The purchases reinforce the company’s “commitment to the development and use of crypto assets and blockchain technology in the region,” according to a statement. “With the investments, Mercado Libre also intends to stimulate the regional ecosystem, allowing it to offer increasingly relevant products and services.”

Shares in MercadoLibre swung between gains and losses early trading Friday.


Jeremy Grantham Doubles Down on Crash Call, Says Selloff Has Started

  • GMO co-founder predicts drop of almost 50% in benchmark stocks
  • Investor favors overseas value stocks, cash, commodities, gold

Jeremy GranthamPhotographer: Matthew Lloyd/Getty Images By

Erik Schatzker

January 20, 2022, 9:00 AM MSTUpdated onJanuary 20, 2022, 11:14 AM MST


Jeremy Grantham, the famed investor who for decades has been calling market bubbles, said the historic collapse in stocks he predicted a year ago is underway and even intervention by the Federal Reserve can’t prevent an eventual plunge of almost 50%.

In a note posted Thursday, Grantham, the co-founder of Boston asset manager GMO, describes U.S. stocks as being in a “super bubble,” only the fourth of the past century. And just as they did in the crash of 1929, the dot-com bust of 2000 and the financial crisis of 2008, he’s certain this bubble will burst, sending indexes back to statistical norms and possibly further.

That, he said, involves the S&P 500 dropping some 45% from Wednesday’s close — and 48% from its Jan. 4 peak — to a level of 2500. The Nasdaq Composite, already down 8.3% this month, may sustain an even bigger correction.

“I wasn’t quite as certain about this bubble a year ago as I had been about the tech bubble of 2000, or as I had been in Japan, or as I had been in the housing bubble of 2007,” Grantham said in a Bloomberg “Front Row” interview. “I felt highly likely, but perhaps not nearly certain. Today, I feel it is just about nearly certain.” https://6e4db271a543cc5854d4abb4f76f7a78.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html In Grantham’s analysis, the evidence is abundant. The first sign of trouble he points to came last February, when dozens of the most speculative stocks began falling. One proxy, Cathie Wood’s Ark Innovation ETF, has since tumbled by 52%. Next, the Russell 2000, an index of mid-cap equities that typically outperforms in a bull market, trailed the S&P 500 in 2021. Finally, there was what Grantham calls the kind of “crazy investor behavior” indicative of a late-stage bubble: meme stocks, a buying frenzy in electric-vehicle names, the rise of nonsensical cryptocurrencies such a dogecoin and multimillion-dollar prices for non-fungible tokens, or NFTs. “This checklist for a super bubble running through its phases is now complete and the wild rumpus can begin at any time,” Grantham, 83, writes in his note. “When pessimism returns to markets, we face the largest potential markdown of perceived wealth in U.S. history.” Regression Study on S&P 500 LOG Chart     It could, he said, rival the impact of the dual collapse of Japanese stocks and real estate in the late 1980s. Not only are equities in a super bubble, according to Grantham there’s also a bubble in bonds, “the broadest and most extreme” bubble ever in global real estate and an “incipient bubble” in commodity prices. Even without a full reversion back to statistical trends, he calculates that losses in the U.S. alone may reach $35 trillion. Grantham is a dyed-in-the-wool value manager who’s been investing for 50 years and calling bubbles for almost as long. He knows his predictions are fodder for skeptics. One obvious question: How could the S&P 500 advance 26.9% in 2021 — its seventh-best performance in 50 years — if stocks were poised to plummet? https://6e4db271a543cc5854d4abb4f76f7a78.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html Rather than disprove his thesis, Grantham said the strength in blue-chip stocks at a time of weakness in speculative bets only reinforces it. “This has been exactly how the great bubbles have broken,” he said. “In 1929, the flakes were down for the year before the market broke, they were down 30%. The year before they’d been up 85%, they had crushed the market.” Seeing the same pattern that played out in every past super bubble is what gives him so much confidence in predicting this one will implode similarly. Grantham pins the blame for bubbles of the past 25 years mostly on bad monetary policy. Ever since Alan Greenspan was Fed chairman, he argues, the central bank has “aided and abetted” the formation of successive bubbles by first making money too cheap and then rushing to bail out markets when corrections followed. https://6e4db271a543cc5854d4abb4f76f7a78.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html Now, investors may no longer be able to count on that implied put. Inflation running at the fastest clip in four decades “limits” the Fed’s ability to stimulate the economy by cutting rates or buying assets, Grantham said. “They will try, they will have some effect,” he added. “There is some element of the put left. It is just heavily compromised.” Under these conditions, the traditional 60/40 portfolio of stocks offset by bonds offers so little protection it’s “absolutely useless,” Grantham said. He advises selling U.S. equities in favor of stocks trading at cheaper valuations in Japan and emerging markets, owning resources for inflation protection, holding some gold and silver, and raising cash to deploy when prices are once again attractive. “Everything has consequences and the consequences this time may or may not include some intractable inflation” Grantham writes. “But it has already definitely included the most dangerous breadth of asset overpricing in financial history.”   https://www.investors.com/market-trend/stock-market-today/dow-jones-futures-market-correction-shows-no-mercy-fed-meeting-apple-lead-5-big-catalysts/?src=A00220 Dow Jones Futures Rise After Market Correction Shows No Mercy; Fed Meeting Leads 5 Big Catalysts ED CARSON 09:24 PM ET 01/23/2022 Dow Jones futures rose Sunday night, along with S&P 500 futures and Nasdaq futures, heading into a massive week of earnings from Apple to Tesla as well as a key Federal Reserve meeting. The stock market correction took a firm hold last week, with the major indexes suffering sharp losses and breaking several key support levels. Even sectors of strength, notably financials, came under heavy pressure. So far bulls have made only momentary charges, with investors quick to sell rebounds instead of buying the dip. It’s a time to be heavily defensive. Tesla stock and Dow Jones giants Apple (AAPL), Microsoft (MSFT) and Caterpillar (CAT) are on tap this week, along with dozens of other quality companies. But the main event will likely be the Federal Reserve meeting on Jan. 25-26. The Fed meeting announcement Wednesday afternoon and Fed chief Jerome Powell’s news conference could set the tone for the stock market and Treasury yields for weeks to come. The Fed is expected to continue its accelerated bond taper, staying on track to end asset purchases by mid-March. But the real issue is what happens next. Fed chief Powell will likely offer commentary on the timing and pace of interest rate hikes and balance sheet reductions. Talk of reducing the balance sheet, and at a fast clip, has been a big reason why the 10-year Treasury yield has spiked and the stock market has entered a correction. Tesla (TSLA) and Microsoft stock are on IBD Leaderboard. MSFT stock is on the IBD Long-Term Leaders list. Tesla stock is on the IBD 50 list. The video embedded in this article discusses the market correction in depth, while also analyzing Apple stock, UnitedHealth (UNH) and J.B. Hunt Transportation Services (JBHT). Dow Jones Futures Today Dow Jones futures rose 0.6% vs. fair value. S&P 500 futures climbed 0.75% and Nasdaq 100 futures advanced 0.9%. The 10-year Treasury yield rose 2 basis points to 1.77%. U.S. crude oil futures climbed 1% after backing off multiyear highs late last week. Fears of a Russian invasion into fresh areas of Ukraine loom large for energy markets. Bitcoin continued to sell off along with other cryptocurrencies on Saturday, recovering slightly to about $36,000 on Sunday. It peaked at $68,990.90 in early November. Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session. Coronavirus News Coronavirus cases worldwide reached 351.99 million. Covid-19 deaths topped 5.61 million. Coronavirus cases in the U.S. have hit 71.92 million, with deaths above 889,000. Coronavirus cases in the U.S. are falling, albeit from extremely high levels. New York and other states hit early by the omicron Covid variant are leading the decline. Deaths have picked up in the past few weeks, but not nearly as much as new cases. Stock Market Correction The market correction took hold last week and didn’t let go, with the major indexes falling every day of the holiday-shortened week. The Dow Jones Industrial Average tumbled 4.6% in last week’s stock market trading. The S&P 500 index skidded 5.7%, its worst loss since the coronavirus crash in March 2020. The Nasdaq composite plunged 7.6%. The small-cap Russell 2000 dived 8%. The 10-year Treasury yield spiked to a two-year high of 1.87% intraday Wednesday, but closed the week down slightly at 1.75%. Crude oil futures rose 2.2% to $85.14 a barrel, despite pulling back slightly late in the week from their highest levels since 2014. ETFs Among the best ETFs, the Innovator IBD 50 ETF (FFTY) plummeted 11.4% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) tumbled 8.6%. The iShares Expanded Tech-Software Sector ETF (IGV) retreated 5.2%, with MSFT stock a major component. The VanEck Vectors Semiconductor ETF (SMH) dived 11.5%, as the formerly resilient chip sector broke hard. SPDR S&P Metals & Mining ETF (XME) tumbled 10% last week. The Global X U.S. Infrastructure Development ETF (PAVE) slumped 6.4%. U.S. Global Jets ETF (JETS) descended 6.2%. SPDR S&P Homebuilders ETF (XHB) stepped down 7.7%. The Energy Select SPDR ETF (XLE) lost 3.2%, even amid rising energy prices. The Financial Select SPDR ETF (XLF) retreated 6.5%. The Health Care Select Sector SPDR Fund (XLV) fell 3.45% Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) slumped 10.9% last week and ARK Genomics ETF (ARKG) 9.7%. Tesla stock remains the No. 1 holding across ARK Invest’s ETFs. Microsoft Stock Microsoft earnings are due Tuesday night, providing insight to other software makers and cloud-computing giants. Microsoft stock had looked strong at the end of 2021, but has slumped in the new year. Shares fell 4.6% to 296.03 last week, and are closing in on their 200-day line. A strong rebound from the 200-day could offer a buying opportunity for MSFT stock as a Long-Term Leader. For a traditional position trade, investors should wait until Microsoft regains the 50-day line at least, which likely wouldn’t happen without the broader market staging a real rebound. The official buy point is 349.77 from a flat base, according to MarketSmith analysis. The relative strength line for Microsoft stock has fallen over the past two months, but hasn’t plunged. The RS line, the blue line in the charts provided, actually ticked up last week. That’s a reflection of just how badly the S&P 500 performed last week. https://research.investors.com/ibdchartswp.aspx?cht=pvc&type=daily&symbol=MSFT Tesla Stock Tesla earnings are due Wednesday night. The EV giant should report strong earnings growth amid booming vehicle deliveries and strong pricing power. Investors may be more interested in 2022 guidance, including an overall delivery target and when the Berlin and Austin plants will finally open. They’ll also want to learn when future vehicles may arrive. Cybertruck production reportedly has been pushed to 2023, but Tesla hasn’t confirmed that. Any tangible guidance on 4680 battery cells would be greatly appreciated as well. Tesla stock dived 10.1% to 943.90 last week. Shares are losing sight of a now-sliding 50-day line and are back below the key 1,000 level. TSLA stock is still trading within a somewhat-loose double-bottom base, but is in the lower half to be sure. The buy point is just above 1,200. The RS line for Tesla stock has been trending lower in a choppy fashion over the past two weeks. On the plus side, TSLA stock has held up much better than most growth stocks, especially those with triple-digit price-earnings ratios. https://research.investors.com/ibdchartswp.aspx?cht=pvc&type=daily&symbol=TSLA Apple Stock Apple stock fell 6.2% last week, tumbling through its 50-day and 10-week moving averages, a solid sell signal. But the RS line for AAPL stock barely dipped. Apple earnings are due Thursday night. Year-earlier comparisons are getting much tougher for the iPhone giant. Guidance will be key. A positive reaction to Apple earnings would not only lift AAPL stock, but likely a slew of chipmakers and other companies in the iPhone ecosystem. https://research.investors.com/ibdchartswp.aspx?cht=pvc&type=daily&symbol=AAPL Caterpillar Stock Caterpillar earnings close out a busy week on Friday. CAT stock fell 6.5% to 214.09 last week, testing its 200-day line once again. But that follows four straight weekly gains, the last two on strong volume. Caterpillar stock has now formed a handle on its consolidation going back to early June. The CAT stock buy point is now 230.43. The RS line for Caterpillar stock is well off highs, but has moved solidly higher so far in 2022. https://research.investors.com/ibdchartswp.aspx?cht=pvc&type=daily&symbol=CAT Stock Market Analysis It’s a stock market correction, make no mistake. The major indexes closed at or near session lows throughout the week, with the Nasdaq composite and Russell 2000 down more than 1% each day. The Nasdaq has fallen below its 200-day line for the first time since April 2020. The composite didn’t stop there, undercutting October lows to its lowest levels since June. The Russell 2000 is at a 52-week low. The Dow Jones sank through its 50-day and 200-day lines last week. The S&P 500 index, which led the market rally in 2021, broke below its 200-day line Friday. The advance-decline line, lagging for months, has plunged in the past few weeks. Growth stocks continue to lead the sell-off, but financials were hard hit last week as bond yields pared back and earnings reports were weak at best. Metals and mining stocks, which looked so strong a week ago, plunged this past week, though a few names still look OK. Energy stocks gave up some ground. A market bounce wouldn’t be a surprise early next week, as bulls try to make a stand near the S&P 500’s 200-day. The CBOE Volatility Index, commonly known as the VIX, has run up in the past few days, finally getting close to at least its early December peaks. When the so-called market fear gauge reaches extreme levels, it can signal a short-term bottom is near. The market tried to rebound several times this past week, but the bounces only lasted a few minutes or hours. At some point stocks will have a positive session, but that won’t mean the market has bottomed. Wait to see if the stock market rally attempt stages a follow-through day to confirm the new uptrend. What To Do Now Earnings season typically is a nail-baiting time, as investors have to decide whether or not to hold positions into quarterly results. But now, most investors should be largely in cash except for core holdings of longtime winners. Investors should be looking for stocks that are holding up relatively well in the market correction. Don’t be too much on whether the stocks are in proper bases or setting up near buy points. When a market rally attempt is a couple days in, you can start to focus more on stocks setting up buying opportunities ahead of a follow-through day. Right now, you’re looking for raw talent. Right now, Apple stock is giving up ground but still holding up reasonably well. It could look a lot better or worse after earnings. UnitedHealth, J.B. Hunt and Travelers (TRV) have already reported earnings, removing a key uncertainty, but that doesn’t mean they’ll continue to hold up. Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors. Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.   https://www.marketwatch.com/story/these-five-signals-will-tell-you-when-the-wall-street-correction-is-over-says-veteran-strategist-11643113067 These five signals will tell you when the Wall Street correction is over, says veteran strategist Last Updated: Jan. 25, 2022 at 9:37 a.m. ETFirst Published: Jan. 25, 2022 at 7:17 a.m. ET By  Barbara Kollmeyer Critical information for the U.S. trading day =One. A more dovish Fed, which would likely lower the 10-year Treasury Inflation-Protected Security real yield that has been pressuring growth stock price/earnings ratios. That’s unlikely before the markets get the first rate increase, says Stifel. Chart, line chart

Description automatically generated BLOOMBERG DATA, STIFEL ESTIMATES. Two. The U.S. purchasing managers index for manufacturing index must bottom, which Stifel doesn’t see happening before April. Often, the annual PMI index change correlates with or leads year-to-year S&P 500 price, earnings per share and industrial production, they note. Chart

Description automatically generated Three. Global M2 money supply — that’s money held by the public — must bottom, and again this is unlikely until China’s currency weakens. “China is 37% of global money supply in dollar terms and a weaker Chinese yuan would send the dollar up and growth in global money supply in dollar terms down, tightening U.S. financial conditions and lower the P/E ratio for the S&P 500,” says Bannister and the team. So the next “shoe to drop” is a weaker yuan. Try the NEW MarketWatch Retirement Planner “So much more thorough and easier to manipulate than the ‘plan’ created for me by my advisor. When something changes in my life or my thinking, bingo! I just change assumptions and make sure I still live longer than my money!” – Eric, 56 GET STARTED NOW MarketWatch on Multiple devices Four. S&P 500 quarterly EPS “beats” minus “misses,” which have weakened since the second half of 2021 and have been pressuring stocks, need to calm down. “When EPS beats minus misses are under pressure, in this case falling below the long-term trend (blue line), investors in the S&P 500 must learn to live with diminished policy support while also being subject to a lessening of the year/year change in S&P 500 price,” says Bannister and the team. Diagram

Description automatically generated Five. That geopolitical mess to the East must be settled without hurting U.S. consumers. “Ukraine events will matter: the West retaliating against a major global energy producer like Russia over possible Ukraine events may lead to a sharp decline in U.S. after-tax income after deducting household food & energy costs,” as shown in the below chart, says Bannister and the team. And when that happens, the Senate and U.S. House of Representatives are usually lost for the party in power,” they add. Chart

Description automatically generated Russia has designs on eastern Ukraine only, and has the “nondollar reserves, power over EU energy flows, popular support in Russia and firepower to accomplish their goal of a USSR-style buffer zone separating them from the West,” adds Bannister. Note, while Stifel have admitted it messed up with a summer 2021 correction call, in December it forecast the S&P 500 would hit 4,200 by the first quarter, recommending investors take shelter in defensives and clear out of cyclicals. It also warned that the Fed losing its nerve on rate increases could lead to “the third bubble in 100 years.” You can read that here, and it includes a list of stock recommendations.  

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