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Stock Market Today: January 12, 2022

Stock Market Today: January 12, 2022

John E. Seibert III | 1/12/2022

Before The Bell - Stock prices rebounded nicely during Tuesday’s trading session. Prices rose throughout the day, recovering partially after several days of selling, as fears of inflation and the effects of the coronavirus pandemic eased a bit. The indices ended the day not too far off their highs, with the S&P 500 having risen 43 points, the NASDAQ 211 points, and the Dow Jones Industrial Average 183 points. The futures market continued higher throughout the night. By morning, the futures were in the green.

 

Market breadth was rather positive yesterday, as advancers outpaced decliners by a 2.8-to-1.0 ratio. Energy stocks were among the best performers, aided by strong price increases in the related commodities. On the other hand, utility equities were among the weakest, despite a decline in long-term fixed-income interest rates.

 

Meanwhile, inflation data came out this morning, showing that prices increased 0.5% in December, or 0.6% excluding food and energy. Additionally, in December, inflation was up 7.0% year over year, reaching a multi-decade high. These figures stand to increase the likelihood that the Federal Reserve will hike interest rates in one of their upcoming meetings. Despite this, the futures took a step up on the report, suggesting the data was already baked into equity market valuations. Overall, this signals a decent start to the trading day. Investors should note that the Beige Book summation of economic conditions will be released this afternoon at 2:00 P.M. (EST).

 

In commodity news, oil prices rose notably yesterday. Traders expect demand will increase, as the Omicron variant of the coronavirus may be less impactful than prior expectations. The oil supply has also left traders underwhelmed, as additional production appears to be increasing less quickly than needed to meet demand. Meanwhile, U.S. Treasury bond yields were a mixed bag, with short-term rates rising and long-term rates falling; this scenario is usually a negative for financials’ earnings. The VIX Volatility Index fell slightly as demand for options protection declined, which suggests that traders think that stock price volatility will soon decline.

 

Looking ahead, there will be plenty of economic reports in the coming days. These include initial jobless claims and the Producer Price Index on Thursday, when several regional Federal Reserve governors will also make comments. Traders will be looking to see the current mood at the Fed concerning interest rates. On Friday, retail sales are on the docket; supply chain issues hurting auto sales may impact the outcome here. That same day, the University of Michigan Consumer Sentiment Survey should give some insight into the state of the consumer. Overall, we think Wall Street’s attention will primarily be on the impact of the coronavirus pandemic on the U.S. consumer and how inflation will affect future interest rates.  - John E. Seibert III

 

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.

 

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