Week of January 18, 2022
Investors are coming off a rough week with all three major market indices losing ground, especially the tech-heavy NASDAQ now down 5% for the new year, to potentially begin another rough week. The Dow Jones Industrial Average in the pre-market is indicating to open 273 points lower, after the index dropped 201 points last Friday. Futures for the S&P 500 point to a 1% loss and the NASDAQ is poised to fall 1.6%.
“Stock futures are sharply lower today as global bond yields surge to multi-year highs,” wrote Tom Essaye, founder of Sevens Report Research. Interest rates are rising all along the yield curve, with the benchmark 10-year note hitting 1.83%, its highest level since January 2020. The yield has soared this year, rising from a low of 1.36% during an early December slide. Driving the move higher has been persistently high inflation, which has forced the Federal Reserve to plan several interest rate hikes this year. What’s more, the Fed is now considering selling off part of its bond portfolio, which drives less money into the bond market, lowering bond prices and raising their yields.
In the commodity space, oil was at its highest level since 2014 amid geopolitical tensions in the Middle East, with Iran-backed soldiers in Yemen claiming to have launched drone strikes at the United Arab Emirates (UAE). Futures contracts for West Texas Intermediate crude were up more than 1% to almost $85 per barrel.