The past week was marked by sharp fluctuations in the financial markets. One example was the sell-off in large tech companies last Friday, which caused a massive drop in stocks.
Obviously, traders had a lot to digest over the past few days, from the hawkish stance of Fed Chairman Jerome Powell to uncertainty on how the omicron coronavirus outbreak could impact global recovery. The mixed US employment report also did nothing to stave off another bout of volatility because many believe that the data will not change anything. Authorities are more likely to conduct an early tapering, especially in bond purchases, amid high inflation.
Now, stock indices returned to their mid-point retracement values:
The downtrend continued because Tesla stocks fell about 6.5% and Meta Platforms, parent company of Facebook, crashed 19.7%. Apple shares also declined after news emerged that a number of employees in the US State Department were hacked.
Jamie Cox, managing partner for Harris Financial Group said: "Today's non-farm payroll report looks messy to me. Best to wait for the revisions next month before sounding the stagflation alarm too loudly."
Meanwhile, Independent Advisor Alliance CIO Independent Advisor Alliance noted: "The economy is strong, but the labor market is reaching its full potential, and inflationary forces are already elevated, which is why the Fed is feeling more urgency to complete their tapering early."
Ben Laidler, global markets strategist at eToro also said: "This is a reminder of the uncertainty on the pace of the jobs recovery. It will give the Federal Reserve pause as it considers accelerating its monetary policy tightening. A slower pace would be welcomed by markets."
The Fed's march towards higher rates poses more risk for equity investors, and the likelihood of a correction in the S&P 500 next year is highly anticipated. This was commented by Bank of America strategist Savita Subramanian, who also said that: "We are in an environment where the dividend yield on the S&P 500 is below where cash yields are likely to be in a year or two."
On a different note, the US Treasury once again stopped labeling any foreign economies as manipulators of their exchange rates. But they continued to accuse Taiwan and Vietnam for meeting all three criteria for listing. Switzerland, meanwhile, was dropped off the list after officials said it violated two criteria and narrowly missed the third.