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Wealth Daily 06 January 2022

WEALTH DAILY 2022-01-06
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The selling in US tech stocks accelerated on Wed, after the release of minutes from the last Fed meeting. The minutes showed that policymakers are considering more aggressive tightening than was expected, spooking investors. It did not take long for the rest of the market to be swept up by the selling.

The tech-heavy NASDAQ saw its biggest one-day loss since Feb on Wed, losing 3.34% to end at 15,100.17. The Dow Jones Industrial Average lost 392.54 pts, or 1.07%, to close at 36,407.11. The S&P 500 index fell 1.94%. The small cap Russell 2000 dropped 3.3%.

The Fed discussed beginning to “run off” (reduce) the bank’s huge balance sheet, at the same time they started hiking rates. Previously, investors thought the Fed would not begin running off its balance sheet until after the first several rate hikes. Traders concluded Fed policymakers are eager to address inflation.

The mega tech stocks, Alphabet (GOOGL US, -4.59%), Meta Platforms (FB US, -3.67%), Microsoft (MSFT US, -3.84%), and Apple (AAPL US, -2.66%) generally fell in line with the market. Tech stocks that are in an earlier phase of their growth cycle, Salesforce (CRM US, -8.28%), Adobe (ADBE US, -7.14%), Xilinx (XLNX US, -6.16%) and NVida (NDVA US, -5.76%), fared worse.

Bucking the trend, Intel (INTC US, +1.37%) shares rose on Wed. At the CES technology conference, it showed off new processing and graphics chips.

The Fed minutes boosted the yield of the 2-year US Treasury note 5 basis points (bps) to 0.82%, its highest level in almost 2 years. Traders also had to react to a very strong employment report from private payroll processor, ADP. The yield on the 10-year Treasury note notched up 5.79 bps to 1.7052%.

High yield bonds fell along with equities. The iShares iBoxx High Yield Corporate Bond ETF (HYG US) fell 0.77%.

Bitcoin was not a safe-haven either. Bitcoin’s price fell below US$45,000, to its lowest level since December. However, precious metal futures rose. The most actively traded US gold futures (Feb) contracts settled up $10.50, or 0.6%, at US$1,825.10/oz. March silver, which is the most actively traded silver futures, rose 11.4 cents, or 0.5%, to end at US$23.170/oz.

The ICE dollar index (DXY), which measures the strength of the greenback against a basket of currencies, fell 0.09% to 96.179.

Oil rose after US crude inventories declined for a sixth week. The front-month Brent and WTI futures closed up 20 cents at US$80.20/bbl and 86 cents at US$77.85/bbl respectively.

European equity markets finished higher on Wed. The UK FTSE gained 0.16%, France's CAC 40 rose 0.81%, while the German DAX advanced 0.74%.

Shares of European automakers were upbeat on Wed. Qualcomm (QCOM US, - 0.39%) announced deals to supply chips to automakers including Renault (RNO FP, +5.31%). Stellantis (STLA IM, +4.03%) said it will partner with Amazon (AMZN US, -1.89%) to develop cars and trucks using Amazon’s software.

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