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Monday Morning Coffee: A Rocky Start to 2022 For Tech & Growth Stocks

A rough start for 2022 for U.S. tech and growth stocks is raising stakes for upcoming earnings reports, as investors seek reasons to keep faith in the shares while pricing in U.S interest rates. The S&P 500 information technology sector, which accounts for 29% of the broader index’s weight, is down 5.5% year to date, including steep declines in shares of heavyweights such as Microsoft and Nvidia, both off roughly 9%. Tech bulls are hoping that a strong earnings report will blunt some of the pain. As the Fed raises rates, investors will keep an eye on how much higher long-term Treasury yield rise. Higher yields more steeply discount the value of higher profits, which will pressure growth stocks. Fourth-quarter earnings kick into high gear this week, which is replete with tech stocks. Goldman stocks see the 10-year Treasury yield rising to 2% by year’s end, suggesting only a more moderate rise. However, a slowing economy is an argument against growth stocks.

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Monday Morning Coffee: Losses on Wall Street As Interest Rates and Omicron Increase

Wall Street wrapped up the first week of the year with daily and weekly losses as investors worry about looming U.S. interest rate hikes and unfolding Omicron infections. Stocks fell after data showed the U.S. jobs market was at or near maximum employment, even though employment rose by far less than expected in December. On Wednesday, minutes released of the Fed’s Dec. 14-15 meeting showed officials that the labor market is “very tight” and signaled that the Fed may have to raise rates sooner than expected. The Dow Jones Industrial Average fell 4.81 points, or 0.01% to 36,231.66, the S&P lost 19,02 points, or 0.41% to 4,677.03 and the NASDAQ Composite dropped 144.96 points, or 0.96% to 14,935.90. For the week, the Dow dropped 0.3%, the S&P declined 1.9% and the NASDAQ dropped 4.5%. Investors are concerned that employment will continue to be tight, affected by the Omicron variant, and that the Fed will move more quickly than expected. Investors have been rotating out of technology-heavy growth stocks and into more value-oriented shares, which they think will do better in a high-interest rate environment.

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Monday Morning Coffee: Wall Street Closes High On New Year's Eve

Wall Street closed near record highs in light trading on Friday, the last trading day of 2021, marking the second year of recovery from the global pandemic. All three stock indexes scored monthly, quarterly and annual gains, notching the biggest three-year advance since 1999. The Dow Jones Industrial Average fell 59.78 points or 0.16% to 36,338,3. The &P 500 lost 12.55 points, or 0.16% to 4,766.18 and the Nasdaq Composite dropped 96.59 points, or 0.61% to 15,644. For the year, The Dow was up 18.73%, the S&P 500 was up 27% and the Nasdaq Composite gained 21.4%. companies, consumers, and the broader economy largely thrived in 2032 as they felt their way forward amid a changing landscape, including a tumultuous transfer of power marked by the Jan. 6 Capital riot. Other factors included a labor shortage, generous fiscal/monetary stimulus, hobbled supply chains, and price spikes. Earnings from the S&P companies blew past expectations. Dow transports, considered by many to be a barometer of economic health, registered a gain of 31% for the year. COVID is still here but early data suggests that the Omicron won’t be as deadly as the past versions. Still, interest rates will be going up in 2022 and inflation is a problem and expectations suggest the economy will slow. This will affect financial markets in 2022.

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Monday Morning Coffee: Wall Street Sinks as Omicron Worries Persist

Wall Street finished lower on Friday, weighed down by Big Tech as investors worried about the Omicron coronavirus variant and digested the Federal Reserve’s decision to end its pandemic-era stimulus faster. The Dow Jones Industrial Average declined 1.48% to end at 35,365.44, while the S&P 500 lost 1.03% to 4,6270.64 and the Nasdaq Composite dropped 0.07% to 15,169.68. For the week, the Dow dropped 1.7%, the S&P 500 lost 1.9% and the Nasdaq Composite declined 2.9%. The indexes started to decline broadly on Wednesday after the Federal Reserve signaled three-quarter point interest rate increases for 2022 to combat inflation. Adding to the uncertainty, Pfizer said on Friday, the pandemic could extend through next year. European countries geared up for further travel and social restrictions and a study warned the rapidly spreading Omicron variant was five times more likely to reinfect people than its predecessor, Delta. Traders pointed to year-end tax selling and the simultaneous expiration of stock options, stock index features, and index options contracts known as triple witching-as potential causes for increased volatility.

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Monday Morning Coffee: Indexes Advance as Inflation Runs High

The major Wall Street indexes advanced broadly on Friday despite a report that showed inflation running at the highest level in 39 years. The Dow Jones Industrial Average rose 216.3 points, or 0.06% to 35,970.99, the S&P 500 gained 44.57 points, or 0.95% to 4,712.02 and the Nasdaq Composite added 113.23 points, or 0.73% to 15,630.60. The advance in the financial markets came as the CPI report showed inflation advanced 0.8% in November, up 6.8% from a year earlier and the biggest annual increase since 1982. The Fed’s next meeting of the Open Market Committee is this week and investors will be looking for clues to both the pace of the taper on its bond-buying program and hints for interest rate increases. Markets have priced in a potential lift-off for rates starting in Q3-2022 and another move by that year’s end, each move is expected to be by 25 basis points. With supply bottlenecks showing little signs of easing and companies raising wages as they compete for scarce workers, high inflation could persist well into 2022. Investors will be glued to the FMOC meeting looking for clues to a potential earlier lift-off and perhaps, more forceful Fed actions.

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