- Trading volumes remain light to start 2022
- Though markets rise, virus and inflation worries linger
- Oil vaults higher ahead of this week's OPEC monthly meeting
Key Events
US benchmark contracts on the Dow Jones, S&P 500, NASDAQ and Russell 2000 advanced on Monday, along with European shares to start the 2022 trading year.
Nonetheless, investors continue monitoring developments on the virus front, as the spread of the highly contagious Omicron variant continues accelerating globally. Though its symptoms have so far been milder than previous variants, ongoing worries persist as signaled by mixed Asian trade. A second focus for markets remains the Fed's path to tightening monetary policy. Inflation will therefore undoubtedly have a crucial role in how policymakers respond.
Both oil and the dollar gained.
Global Financial Affairs
All four futures on the major US equity indices were higher this morning, with those on the tech-heavy NASDAQ 100 vying for leadership with contracts on the small cap Russell 2000 at time of publication. Mega cap futures on the Dow lagged, suggesting a cyclical rollback. Though trading was mixed in Asia, volumes remain thin; markets in the UK, China, and Japan were all on holiday.
Europe's STOXX 600 gained over 0.5% earlier today, though the pan-European index has dipped a bit since then, starting 2022 on a positive note. The index hit a new record to finish out 2021, having surpassed the one posted in November. This morning's gains extend the 22.4% rise last year, its second-best annual showing since 2009. Central bank stimulus, growth in corporate profits, and an orderly distribution of vaccines helped investors overcome jitters from Omicron's risk.
Today, carmakers outperformed during European trade, jumping 1.3% following positive monthly sales reports from global automobile companies.
Germany's largest airline, Lufthansa (DE:LHAG), surged over 5% as analysts at Citigroup aggressively upgraded Europe's second-largest airline from 'sell' to 'buy.' Technically, the airline's price could now go either way.
If the price beats its November highs, the stock will have completed a rounding bottom. Conversely, if the price registers a level lower than the November low, it will have completed an H&S continuation pattern.
Unlike airlines, however, carmaker stocks, which are considered cyclicals, therefore traditionally economically sensitive, are not so clear cut. To begin with, cars have become more reliant on technology which increasingly includes semiconductors, a growth sector overall. Still, because of the global chip shortage, many auto manufacturers missed both production and revenue targets in 2021.
Nevertheless, in the case of EV carmaker Tesla (NASDAQ:TSLA), chip supply constraints didn't seem to have much of an impact. The Austin, Texas-based electric vehicle manufacturer posted record fourth-quarter and full-year sales figures, having delivered 308,600 vehicles in the fourth quarter, obliterating its previous record.
The big technical question now: will TSLA's fundamentals be enough to push the stock out of its falling channel?
Treasury yields, including for the 10-year note, rose slightly, finding support at 1.5%.
Last week, when trading volumes were thin, rates broke on the wrong side of a continuation pattern. We're monitoring their movement this week, when volume returns to the market, to see whether holiday week activity actually represented the trend.
We're waiting for the same confirmation for a failed bullish dollar pattern.
The greenback broke through the downside of what we had expected to be a bullish pattern.
We're also waiting on a resolution for Gold's interrupted uptrend of last week.
We're hoping it will be resolved with a breakout from the sideways range.
Bitcoin started Monday's trade lower for a second day, but at time of publication, reversed higher.
If the cryptocurrency falls below the $40,000 level, it will have completed a sizeable H&S top, which could be the beginning of the end for the digital currency initiative. On the other hand, if the entire crypto asset class—of which BTC is the leader by market cap— experiences the level of gains seen in 2021, digital currency risk could reach a new tipping point.
Oil jumped after Libyan supply tightened before this week's OPEC meeting. Positive OPEC+ action could help put a firm floor under the price of the energy commodity.
WTI jumped toward the top of a rising, bearish wedge, which is forming the right side of a massive H&S top.
Up Ahead
- ISM Manufacturing PMI prints on Tuesday
- FOMC meeting minutes are scheduled for release on Wednesday.
- ECB's Schnabel speaks on Thursday.
Market Moves
Stocks
- S&P 500 futures rose 0.4%
- NASDAQ futures gained 0.5%
- South Korea's KOSPI advanced 0.4%
- Taiwan's Taiex rose 0.3%
- Hong Kong's Hang Seng declined 0.6%
Currencies
Bonds
- Trading on cash Treasuries is closed in Asia and the UK today
- The yield on 10-year Treasuries rose 2.5%
- Australia's 10-year yields rose four basis points to 1.67%
Commodities
- West Texas Intermediate crude gained 0.9% to $76.15 a barrel
- Gold fell 0.2% to $1,825.54 an ounce