The stock market may face more turbulence in the coming week

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Traders work on the trading floor of the New York Stock Exchange (NYSE) in New York City on November 29, 2021.

Bren Dank Demead | Reuters

After a week of severe volatility that caused many stocks to plummet, volatility may continue to plague the market.

In the following week, investors await more news about the omicron Covid variant and another inflation report on Friday, which is expected to show that consumer prices are still the hottest in 30 years.

In the past week, stocks have been sold off due to concerns about omicron variants and fears that the Fed will abandon its easing policy and raise interest rates earlier than expected. Fed Chairman Jerome Powell stated in a congressional panel on Tuesday that the Fed will consider speeding up the reduction of its $120 billion monthly bond purchase plan when it meets on December 14 and 15. The Federal Reserve implemented a bond purchase plan ahead of schedule to support the economy during the pandemic in 2020.

Jack Ablin, Cresset’s chief investment officer, said: “This will be a bit turbulent December because we may have to wait for the earnings season to return and get back to fundamentals.” “Because many ratios imply this. High, such as the price-to-sales ratio, the price-to-earnings ratio, when you throw it into the funnel along with interest rates and all other factors, things are not that bad. I don’t think we are teetering on the edge of a cliff.”

But Ablin did say that Powell’s remarks disturbed investors, who worried that the Fed would also speed up the pace of raising interest rates. Powell admitted that he was wrong to say that inflation is “temporary” or that it scares investors. Bond purchases are now scheduled to end in June.

“I’m not sure what investors think about inflation. Do they think the Fed will raise interest rates too early and everything will roll? Since Powell removed the’temporary’ from his conversation, investors have been somewhat out of balance.” Ablin said.

It is expected that the November Consumer Price Index or CPI will be announced on Friday morning. Economists surveyed by Dow Jones predict that the index will rise 0.6% monthly and 6.7% year-on-year. In contrast, October saw an increase of 0.9% and a year-on-year increase of 6.2%, which was the largest increase in 30 years.

Dangerous name slammed

As investors withdrew from some of the riskiest stocks, high-priced stocks and growth were hit hardest on Friday. As the stock market plummeted on Friday, U.S. Treasury yields fell. The rate of return is the opposite of price, and this move is considered a hedging. The 10-year Treasury bond yield fell to 1.35%.

The ARK Innovation ETF fell 12.6% this week. Many growth stocks in the fund are in bear market territory. “I think investors must remember that this is not a 15-week strategy. As far as we are concerned, it is a 15-year strategy,” Ablin said.

The Fed should remain quiet in the coming week. Fed officials traditionally do not make important speeches during the power outage, that is, next week, before the December 14th and 15th meetings. One exception is Neel Kashkari, chairman of the Minneapolis Federal Reserve Bank, who spoke at the summit of the National Development Research Center in India on Thursday.

Most of the focus will be on the performance of the market itself.

Scott Redler of T3Live.com said: “Since a bearish day other than November 22, all power has been sold off, but there has been a lot of damage under the hood.” “Now there are finally some leading names appearing. Wrong behavior.” He pointed out that both Microsoft and Apple are weak.

“The money is not hidden in Amazon, Google or Facebook. They have been for several weeks,” he said.

The Standard & Poor’s Index fell below the 50-day moving average for the second consecutive day on Friday. 50 days is 4,544. This is a signal to some market technicians that the index is about to collapse. The 50-day moving average is the average closing price of the past 50 days.

“Basically, this is actually a retest of support because we have a relief rally [Thursday],” said Katie Stockton, founder of Fairlead Strategies. She said that the S&P 500 would need to close below the 50-day line for two consecutive days before it is considered a collapse.

“The action in terms of high growth and high multiples is not a good sign,” Stockton said. “We do have some signs of depletion on the downside, but not as common as I hoped. We have seen some heavyweight stocks, such as Adobe, have broken through the 50-day moving average and other levels.” She said, some of them are well-known People have now joined the ranks of sales.

Stockton said: “We are just observing how bad the situation will get. Monday will be the result.” “It also brings it to the end of the weekend… the extreme situation has become more extreme. Since the October low Since then, from a contrarian perspective, sentiment is the most oversold.”

One week ahead of calendar

on Monday

Benefits: Coupa Software, Sumo Logic

Tuesday

income: Toll Brothers, Autozone, John Wiley, Designer Brands, Dave & Buster’s, Casey’s General Store, ChargePoint

8:30 am Trade balance

8:30 am Productivity and cost

1:00 p.m. Treasury bonds auction 54 billion U.S. dollars 3-year Treasury bonds

3:00 pm Consumer Credit

Wednesday

income: Campbell Soup, GameStop, Brown-Forman, Vera Bradley, Rent the Runway, United Natural Foods, Thor Industries

7:00 AM Mortgage Application

10:00 am bumpy

1:00 p.m. Treasury bonds auction 36 billion U.S. dollars 10-year Treasury bonds

Thursday

income: Costco, Oracle, Hormel, Lululemon, Ciena, K. Hovnanian, Broadcom, Vail Resorts, Chewy, American outdoor brands

8:30 am Unemployment benefits

1:00 p.m. Treasury bonds auction $22 billion 30-year bonds

Friday

8:30 am CPI

10:00 AM Consumer sentiment


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