Interest rate hikes in sight
How are the stock markets doing?
01/23/2022, 4:15 p.m
It can’t hurt investors to buckle up for the week ahead as well. Because the US Federal Reserve determines its further monetary policy, Apple and Tesla report on their business. Strong price swings are quite possible.
Investors should be prepared for a continuation of the wild ride on the stock markets in the coming week. The focus is on two things: On the one hand, the US Federal Reserve decides on the further course of monetary policy. On the other hand, tech heavyweights present quarterly figures.
The Fed leadership will announce the results of their deliberations on Wednesday. Although an immediate interest rate hike is ruled out, the market firmly expects the central bankers to lay the foundation for such a step in March. “The inflation and interest rate concerns are not going away anytime soon,” warned Craig Erlam, market analyst at brokerage firm Oanda. Should the Fed signal a rate hike of more than a quarter of a percentage point for March, further price losses on the stock market must be expected.
The tech titles in particular could be even more affected than before. Higher interest rates are poison for financing the liabilities and investments of the industry. On the other hand, strong quarterly reports and outlook could help alleviate the downward pressure. Weak forecasts, such as those recently made by the streaming market leader Netflix, are likely to have the opposite effect.
Until the US Federal Reserve’s results are known, uncertainties about its inflation assessment and the future path of interest rate hikes will dominate. With so much uncertainty, the market usually goes into “risk-off” mode, selling everything in the stock market.
As can be seen in the past week, interest-sensitive technology and growth stocks are no longer the only ones to fall. Former corona winners such as delivery services and healthcare companies are flying out of their depots, and sectors such as renewable energies cannot fundamentally justify the inflated expectations. Even the cyclical growth winners from sectors such as auto, steel and raw materials are sold off.
Apple and Tesla present figures
This seems to be fundamentally justified, because the explosion in inflation data makes it increasingly urgent for the US Federal Reserve to adopt a more aggressive interest rate course. Within weeks, expectations jumped from just three US interest rate hikes this year to four or five. This repeatedly forced the market to price in further discounts on the share price.
The flagships in the US technology sector should provide a lot to talk about. IBM will present business figures on Monday, Microsoft will follow on Tuesday and Apple on Thursday. The quarterly figures from Tesla and Intel on Wednesday also promise excitement. In Germany, figures from the laboratory outfitter and pharmaceutical supplier Sartorius are on the agenda. Deutsche Bank reports on the past quarter on Thursday.
The Fed’s decision pushes the upcoming economic data in the new week into the background. The highlight in the US is personal income and consumer spending on Friday. The former allow conclusions to be drawn about inflationary pressure. The latter are considered the mainstay of the world’s largest economy. Analysts expect growth in December to slow down to 0.3 and 0.1 percent compared to the previous month.
According to Helaba, Tuesday’s Ifo business climate for January should give a foretaste of a better spring. On Thursday, the GfK index provides information about the buying mood of German consumers.
In addition, the economic growth in Germany and the USA in the fourth quarter is of particular interest. The data will be published on Friday and Thursday respectively. Right at the start of the week there is sentiment data from industry and the service sector in the euro zone and the United States.