10th - 14th Jan 2022 Weekly Round-Up: Continued Volatility Around Rates

Friday, 14 Jan 2022 5:30 PM EST

Markets finished the week lower as investors continued to price in the potential for as many as four Federal Reserve interest rate hikes by year end. We heard more from the Federal Reserve this week, either during confirmation hearings for Powell and Brainard or interviews from other officials, and the common message among them was a hawkish one: "fight inflation with monetary tightening." Nasdaq continued to be under pressure, something that we have been repeating for a while. 

Here is a quick look at some of the broader market measures: The U.S. dollar index pulled back slightly just above the 95 level. Gold was about flat on the week, trading at around the $1,800 level. WTI crude prices strengthened to the low $80s-per-barrel area. The yield on the 10-year Treasury yield was holding at around 1.76% level.

Within the portfolio, we received earnings from Wells Fargo (WFC) on Friday before the opening bell. We will be writing about the quarter in the coming days, but certainly the market reaction was very positive, as shares closed ~3% higher.

In addition to earnings, we received several key macroeconomic updates this week.

• Consumer price index for December (overall CPI MoM: +0.5% vs +0.4% estimate; Core CPI YoY: +5.5% vs 5.4% estimate)

• Weekly initial jobless claims: 230,000 vs 200,000 estimate; four-week moving average for claims: 210,750 (+6,250 vs prior week)

• Producer price index for December (overall PPI MoM: +0.2% vs +0.4% estimate; Core PPI YoY: +6.9% vs 6.9% estimate)

• Retail sales for December (overall sales MoM: -1.9% vs -0.1% estimate; retail sales ex-Auto & Gas MoM: -2.5% vs -0.2% estimate)

• Industrial production and capacity utilization for December (production MoM: -0.1% vs +0.2% estimate; capacity: MoM 76.5% vs 77.0% estimate

State Of The Portfolio and Outlook 

Much similar to last week, we continued to make many buys and sells into the volatility and whipsaw. Most notably, we trimmed gains in Ford (F), Wells Fargo (WFC) and deployed the capital into some technology and healthcare names. You can see all detailed actions below.

Looking to next week, fourth-quarter 2021 earnings will pick up next week. On Monday, the market will close to observe MLK Day. Within the portfolio, we will hear from Morgan Stanley (MS) on Wednesday before the opening bell.