Covid developments dominate the market again next week after Friday’s defeat

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, US, October 14, 2021.

Brendan McDermid | Reuters

Uncertainty over a new strain of the emerging coronavirus may continue to rattle markets, just as Friday’s employment report and other data next week show the economy is getting stronger.

Stocks and other risky assets fell in the post-Thanksgiving session on Friday on the back of reports of a new variant in south africa, Investors sought safety in Treasurys. Initial reports of the variant show that it could be more transmissible than the delta variant, and scientists are studying the effectiveness of vaccines against it.

The daw It fell 905 points, or 2.5%, on Friday, its worst day since October 2020 Standard & Poor’s 500 It fell 2.3% on Friday to 4,594, giving it a 2.2% drop for the week.

“I think that’s going to go beyond what we’ll see as well,” said Peter Bokfar, chief investment officer at Bleakley Advisory Group. “It’s a data-packed week with the ISMs and certainly payroll, but I think this new alternative will freeze behavior until there is more clarity.”

According to Dow Jones, economists expect a strong payroll report on Friday, with 581 thousand jobs added, after 531 thousand jobs in October. They expect the economy to have shaken off the effects of the slowdown associated with the delta-Covid variable, and growth in the current quarter may be much stronger than in the third.

The Institute for Supply Management’s manufacturing survey came out on Wednesday, and that should be strong, too.

Scott Riddler, partner with T3Live.com, said many traders were upset by the short, usually market-positive Friday session, and there are key levels the market should hold next week in order to organize the year-end Santa rally.

“Right now, the market has lost some momentum, but it hasn’t broken. It might be good and it can be refueled if the 50-day moving average of the S&P 500 continues next week. Everything is very fluid,” he said.

50 days, at 4,527, is a widely watched momentum indicator, which is basically the average close of the last 50 sessions.

He said the market was already losing momentum last Monday with a bearish reversal.

“On Wednesday, the market sucked up the weakness and gave traders a false sense of security which is usually a nice, easy and short session for the Friday holiday,” Riddler said.

Sam Stovall, chief investment analyst at CFRA, said: Standard & Poor’s 500 It typically gains 7% between its October lows and the year-end close, but this year it has already gained more than 9%.

“We’re ahead of the game and we’re set to have some kind of digestion,” Stovall said on CNBC.

The daw It fell by more than 1,000 points during Friday’s trading. Riskier assets fell even more, with Contact 2000 3.7% closed Friday. West Texas Intermediate oil futures decreased more than 12%, and Bitcoin It decreased by about 8%. Some investors are beginning to reverse bets in the futures market that a strong economic recovery and inflationary pressures will pull the Fed away from the sidelines sooner than expected.

The 10 years treasury The yield, moving opposite the price, has fallen to 1.48% from Wednesday’s high of 1.69%.

Investors will be looking for guidance from Federal Reserve Chair Jerome Powell, who appears before Congress next week with Treasury Secretary Janet Yellen to discuss the coronavirus and the stimulus package under the CARES Act. On Tuesday, there is a hearing before the Senate Banking Committee.

“I think you have to assume the base case is that the virus is still endemic, not reverting to being a pandemic,” said Barry Knapp, founder of Ironsides Macroeconomics. The concern is that the variable spreads and slows activity, hurting supply chains even more. It can boost inflation while slowing growth.

There are risks to stocks, Knapp said, and investors should exercise caution when buying the market in a downturn.

Knapp said the Fed may end up speeding up the process of tapering back its bond purchases, which would move the timeframe for potential interest rate hikes forward.

“The problem with trying to buy the market in general and buy tech stocks in particular is if you buy now because it’s down two percent, it goes up until the end of the year and then sells the market,” he said. For this reason, he prefers to plunge into cheaper sectors such as energy and finance, which were the worst performing sectors on Friday.

Oil and energy will be in the spotlight next week, as OPEC+ meets on Thursday. The United States and other governments agreed to free oil from its Strategic Petroleum Reserves in an effort to lower prices. The United States plans to The release of 50 million barrels.

OPEC+ has said it will continue to increase production by 400,000 barrels per month, despite calls from the White House to speed up the release.

Helima Croft, head of global commodity strategy at RBC, said on CNBC that there is a chance that OPEC will decide to pause its production increase due to the SPR releases.

“I think as we head into the OPEC meeting on Thursday, the question is not only do they pause but they are likely to actually pull some barrels out due to concerns about this new alternative along with the release of the very large SPR,” she said.

She said the United States was releasing a record amount of oil. “We’re going to have a lot of barrels coming into this market, as we have these concerns about the new Covid lockdown restrictions,” she said. “Again, it’s too early to say whether governments will pull the trigger for such measures, but the market will be anxious.”

Next week’s calendar

Monday

10:00 am pending home sales

3:00 p.m. Federal Reserve Bank of New York President John Williams

3:05 p.m. Federal Reserve Chairman Jerome Powell delivers opening remarks at the Federal Reserve Bank of New York event introducing the New York Center for Innovation

5:05 p.m. Federal Reserve Governor Michael Bowman

Tuesday

gains: Salesforce.com, can, Hewlett-Packard Foundation, NetApp, Zscaler and Ambarella

9:00 am Housing prices

9:00 AM Case-Shiller Home Prices

9:45 AM PMI Chicago

10:00 a.m. Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen speak before the Senate Banking Council on the Coronavirus and the CARES Act

10:00 am Consumer Confidence

1:00 p.m. Fed Vice Chair Richard Clarida and Cleveland Fed President Loretta Mester

Wednesday

gains: Royal Bank of Canada, PVH, okta, five below, CrowdStrike, Splink snowflake, Synopsys

Vehicle sales

7:00 AM Mortgage Applications

8:15 a.m. ADP Special Payroll

10:00 a.m. Paul Willen on the House Financial Services Committee

10:00 am construction spending

10:00 AM ISM Manufacturing

10:30 a.m. Williams of the Federal Reserve Bank of New York

2:00 pm beige book

Thursday

gains: Ulta Beauty, Signet Jewelery general dollar, expression, krueger, Toronto Dominion, Imperial Bank of Canada, DocuSign, Asana, MARVEL Technology, Ole outlets, Zumiez, Smith & Wesson

8:30 a.m. Unemployment Claims

8:30 a.m. Atlanta Federal Reserve Chairman Rafael Bostick

11:30 a.m. Atlanta Fed President Bostick

1:00 p.m. Fed Vice Chair Randall Quarles

Friday

8:30 am employment report

10:00 AM ISM Services

10:00 am factory orders

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