- Friday was a mixed, choppy day for US equity markets, with tech and growth stocks doing better while value did worse.
- That meant the Nasdaq 100 outperformed, gaining 0.5%, whilst the Dow underperformed, shedding 0.7%.
It was a choppy and mixed session in US equity markets, marked more by rotations from growth into value and then back again than by any more definitive risk-on risk-off broad equity market moves. In early US trade, the Nasdaq 100 index was down as much as 0.6% and probing the 15,400 level, but the index has since recovered to trade about 0.5% higher nearer to 15,600. Conversely, the Dow was at one point in early trade just 0.4% lower but has since fallen back to trade more than 0.7% lower as tech/growth names recovered. The net result for the broader S&P 500 index has been that it has spent most of the session chopping in negative territory and was at one point more than 1.0% lower, but has since recovered back to nearly trade flat in the 4650s.
Dow underperformance can be explained in part by downside in the financial sector (the S&P 500 financial index dropped 1.4%) after disappointing earnings from big US banks, which kicked off the start of the Q4 2021 earnings season on a sour note. JP Morgan was down more than 6.0% after its trading division posted below-par results and after the company warned that inflation and the rapid spread of Omicron would challenge the outlook for the banking sector in the coming months. Analysts said that worse-than-expected bank results combined with poor the December Retail Sales report are a red flag for the US economic outlook in Q1 and 2022.
Headline Retail Sales was shown to have dropped 1.9% MoM in December, leading to various banks and analysts issuing downwards revisions for the Q4 2021 US GDP growth forecasts. But given that the data comes on the heels of hot Consumer and Producer Price Inflation figures out earlier in the week, it is unlikely to deter the Fed from pressing ahead with multiple rate hikes this year. Indeed, Fed members including John Williams and Mary Daly were both on the wires during Friday’s US session and both stuck to the Fed’s now well-established script that given elevated inflation, monetary tightening this year is warranted.