The Long and Short of it, week ending 21 Jan 2022

Posted:
Publication Type: Market Commentaries

Another volatile week for U.S. stock markets with all 3 major indexes dropping 1% or more each day
of the holiday-shortened week. Investor nervousness surrounding tightening Fed monetary policy
was the main driving force behind last week’s move lower, with growing concerns of higher U.S
interest rates decreasing valuations of most stocks but especially of growth/tech stocks. Year-todate, the S&P 500 Index is down 7.7%, the Nasdaq Composite Index is lower by 12.0% and the Dow
Jones Industrial Average is down 5.7%. Despite some notable exceptions (including Netflix and
Peloton), earnings reports YTD have been predominantly positive (ie, beating expectations) helping
to partially alleviate concerns of falling profit margins due to rising input costs. Thursday’s largerthan-expected jobless claims and Friday’s weaker-than-expected retail sales and existing home sales
releases helped move 10-year U.S. Treasury lower but did nothing to reduce stock valuation concerns
due to fears of rising rates. The 10-year U.S. Treasury rate, up over 8bps through Wednesday,
actually ended the week lower with falling inflation expectations (-11bps) offsetting rising real rates
(+9bps). At week’s end, the S&P 500 Index decreased 5.7% to 4,397.93, the Nasdaq Composite Index
dropped 7.5% to 13,768.9, the Dow Jones Industrial Average fell 4.6% to 34,265.5, the 10-year U.S.
Treasury rate decreased 2bps to 1.77% and the U.S. dollar (as measured by the ICE U.S. Dollar index
- DXY) strengthened 0.5%.

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The Long and Short of it, week ending 21 Jan 2022