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How Aggressive Will the Fed Get in 2022?

Overnight futures are modestly lower after an up week for stocks.

Stock index futures are lower overnight as all eyes remain on the US central bank and interest rates, with Russia’s protracted attack on Ukraine in the near background.

S&P 500 futures are down 0.2%, Nasdaq 100 futures are 0.3% lower and Dow futures are off 0.2% as of 4:00 am ET.

The major indexes all posted gains last week, with the S&P 500 adding 1.8%, the Nasdaq Composite gaining 2.0% and Dow Industrials rising 0.3%. Small caps lagged with the Russell 2000 shedding 0.4%.

The street has been digesting Federal Reserve Chair Jerome Powell’s comments last week that inflation “is much too high” and that the Fed “will take the necessary steps to ensure a return to price stability.”

The market had largely priced in a series of 25-basis-point hikes throughout 2022, but Powell clearly signaled that it was prepared to increase the Federal Funds rate by 50 basis points multiple times.

Goldman Sachs is now looking for 50-basis-point hikes from the Fed coming off their meetings in May and June, and Bank of America revised its Fed forecast to 50-basis-point increases in June and July.

Citigroup is calling for 50-basis-point increases in May, June, July and September, with additional 25-basis-point increases until the Fed Funds rate hits a range of 3.00% to 3.25% in May 2023.

Accordingly, the yield on the benchmark 10-year Treasury note hit a two-year high of 2.503% on Friday.

Brent crude futures remain elevated at $116.12 per barrel, while West Texas Intermediate futures are at $109.26, as of 4:00am ET.

Here are key economic and corporate earnings data releases we’ll be watching this week:

Monday: Earnings from XPeng (XPEV - $9.91 0.07 (0.706%)  ), AngloGold Ashanti (AU - $20.81 0.42 (2.018%)  ), Jefferies (JEF - $31.36 0.01 (0.032%)  ), Gingko Bioworks (DNA - $1.35 0.045 (3.333%)  )

Tuesday: Consumer confidence, job openings; earnings from Micron (MU - $58.63 0.04 (0.068%)  ), lululemon (LULU - $298.81 10.40 (3.48%)  ), McCormick (MKC - $72.79 0.09 (0.124%)  ), Chewy (CHWY - $39.88 1.17 (2.934%)  )

Wednesday: ADP employment report; earnings from Paychex (PAYX - $110.29 0.07 (0.063%)  ), Exelon (EXC - $40.68 0.25 (0.602%)  ), BioNTech (BNTX - $133.33 1.32 (0.99%)  ), UiPath (PATH - $17.40 1.13 (6.466%)  )

Thursday: Jobless claims; earnings from Walgreens (WBA - $33.54 0.20 (0.581%)  )

Friday: Non-farm payrolls

Examining stock options activity from Tradier API, we saw strong bull interest in Apple (AAPL - $159.28 0.96 (0.603%)  ) and NVIDIA (NVDA - $261.99 7.39 (2.821%)  ). Apple shares posted gains each day last week, adding up to a 6.5% advance for the week. Apple has risen 16% in the last two weeks and has now retraced all of its losses for the previous month.

NVIDIA announced at its investor day conference on Thursday that it sees a $1 trillion opportunity across its business lines.

Among bearish options activity, we saw significant interest in Lucid (LCID - $8.19 0.065 (0.794%)  ) and Camber Energy (CEI - $1.37 0.057 (4.161%)  ). Since closing at $55.52 on Nov. 16, 2021, Lucid shares have plummeted nearly 55% under the weight of supply chain concerns and associated production cuts.

Camber Energy remains out of compliance with NYSE American’s continued listing standards related to delayed filings of its 10-K and 10-Qs. The company’s deadline for filing those reports is April 1, 2022, but it has already received an extension from the exchange and another one may be needed.


Source: Equities News

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