US market: S&P and Dow end higher amid Fed meet and mixed macroeconomic signals

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Major U.S. indices staged a late session comeback on Monday as investors rushed to buy beaten-down tech stocks reversing a sharp sell-off earlier in the day. This saw the Dow bouncing back more than 1,000 points, its biggest U-turn ever, to end in the green. All the three major indexes ended in positive territory.

U.S. stocks edged lower on Tuesday as stocks once again came under pressure as the  Fed started its two-day policy meeting and investors braced for a rate hike in the coming months. Also, investors digested a mixed bag of corporate earnings results. All the three major indexes ended in negative territory.

U.S. stocks ended mostly lower on Wednesday after Fed Chair Jerome Powell hinted that the central bank will soon start hiking rates and tighten other monetary policies in the days to come. The Dow and S&P 500 gave up earlier gains to end in negative territory.

US major indexes closed in negative territory on Thursday after a sharp U-turn erased morning gains, continuing a streak of recent volatility as investors weighed upbeat economic data out of Washington alongside Wednesday's Federal Reserve update.

Stocks surged into the close reversing earlier losses on Friday as investors took in earnings results from some major tech companies and another hot print on inflation at the end of another volatile week. Over the week, Dow gained 1.3% and S&P 0.8%.

Weekly market stats with IND

Let’s see the major developments during the week:

Fed Meeting: In the post Fed’s monetary policy committee meeting press conference, Fed Chair Jerome Powell left open the possibility that policymakers would raise rates in 2022 more than the three quarter-point hikes they had signaled after their December meeting, with the first increase coming in March. The chair also acknowledged that the Fed’s roughly  $8.9 trillion balance sheet is substantially larger than it needs to be, making substantial shrinkage necessary. Fears that the Federal Reserve might be “behind the curve” and forced to raise short-term interest rates quickly to tame inflation weighed heavily on sentiment. 

Macroeconomic update: The Commerce Department’s first estimate of economic growth in the fourth quarter showed GDP rising at an annualized rate of 6.9%, well above consensus estimates of roughly 5.5%; for 2021 as a whole, the economy grew by 5.7%, its fastest pace since 1984. Higher-frequency economic indicators indicated some slowing in January, however. On Friday, Core PCE, the Fed's preferred inflation gauge, come in at 4.9%, slightly above expectations of 4.8%

Earnings reports and outlooks: Fourth-quarter 2021 earnings season is now underway. With about 33% of S&P 500 companies having reported, earnings growth for the quarter has come in above expectations, at a solid 24% on-year rise. Major companies like TeslaAppleMicrosoftIntel, etc. have reported their earnings. Despite some notable earnings outperformance, markets have not rewarded these stocks in a meaningful way, as the Fed and inflation backdrop looms large. For 2022, earnings growth is expected to moderate, but still come in around 9.0%, in line with historical averages.

Geopolitical tensions: With tensions mounting between Russia and the Ukraine, experts continue to monitor for signs of escalation  and especially for any economic spillovers. Analysts would expect these tensions to eventually resolve, but are mindful of the near-term support and volatility in energy markets, particularly given that Russia is one of the world's largest oil producers, especially for the European Union.