The Whipsawed Market

After Steep Losses Monday, an upside reversal triggered the start of a market rally that, after whipsawing all week, turned the indices upward Friday. Happy news for stock market bulls, after a choppy week. As the major indices rallied, finishing one of the most tumultuous weeks in memory on a high note, and buoyed by strong earnings from the ‘darlings’ of Wall Street, confidence settled investors’ nerves. Stocks have mostly declined from the start of the year, as investors’ expectations mounted that the Federal Reserve would ‘pivot’ from ‘juicing’ economic growth to combat inflation. Fed Chairman Jerome Powell signaled Wednesday that the central bank would start a series of rate increases in March, ending a long period of ‘rock-bottom’ interest rates. “Cheap money is like a comfort blanket for investors and for markets,” said Jane Foley, senior-foreign-exchange strategist at Rabobank. “Almost inevitably, you start to withdraw some of that cheap money and you’re going to have more volatility in the markets,” she added.

The S&P 500 gained 105.34 points on Friday, or 2.4%, to close at 4431.85. The Dow Jones Industrial Average rose 564.69 points, or 1.7%, to 34725.47, after a volatile day in which it swung between gains and losses, then surged in the last hour-and-a-half of trading. The technology-heavy Nasdaq Composite jumped 417.79, or 3.1%, to 13770.57, erasing losses for the entire week. Shares of Apple, the world’s largest publicly traded company, by market capitalization, on Friday rallied 7% after announcing record revenue and profit. “Apple was the savior yesterday for the whole market,” (1-28-22), said Louis Ricci, head trader of Emles Advisors, an investment-management firm.

Wages Grow At Fastest Pace In 21 Years… ..Employers spent 4% more on wages and benefits last year as workers received larger pay raises in a tight labor market, rebounding the economy and the period of accelerating inflation, marking an increase not seen since 2001. The U.S. employment cost index–a quarterly measure of wages and benefits paid by employees–showed that costs continued to rise at the highest rate in two decades. Interestingly, the figures offered a sign that labor-cost increases could be easing, with the Labor Department reporting a seasonally adjusted 1% rise in compensation for the fourth quarter, down from a 1.2% increase the previous months. Rising pay and benefits are putting more money in workers’ pockets–average hourly wages rose 4.7% in December from a year earlier. Investors and Federal Reserve Policy Makers now consider the labor market to be at or near full employment, despite the fact that the economy has recovered about 84% of the jobs it had before the pandemic.

Heavy Metal Bands Find ‘High’ Notes Selling Fancy Whiskey…..The hottest trend among ‘headbangers’ is branding their own high-end booze. Metal bands including Metallica, Gwar, Motorhead, and Slipknot have all released small-batch whiskeys targeted at hard-core fans with deep pockets. Metallica, arguably the world’s most popular metal band, ‘crashed the whiskey party’ with its own offering four years ago. Mr. Jeff Quint, of Cedar Ridge Distilling, developed a premium- batch-whiskey with the bands’ Slipknot percussionist Shawn Crahan, known as “Clown” because he wears disturbing clown masks. The resulting Slipknot No. 9 is described as “quite floral,” with notes of honeysuckle and lily, sold 8,000 cases of that whiskey in five months, and have expanded distribution to Canada, Japan, Australia, and Europe. Metallica says its $40 bottle of ‘Blackened,’ a blend of North American whiskies, is “sonically enhanced” and offers fans playlists with songs such as “Devil’s Dance” and “Am I Savage?”, that it says were used to flavor each batch it releases. The prog-metal band ‘Gwar,’ who claim to be ancient aliens abandoned on Antarctica, partnered on rye with Catoctin Creek Distillery in Purcellville, Va., They marketed the result, called ‘Ragnarok Rye,’ as having “an aggressive scent of tobacco, roasted grains, and coffee beans. Most pairings have been with independent distillers, with the ‘big-guys’ moving in fast to take advantage of the…Metal.

RUMBLINGS ON THE STREET

Jerome Powell, Federal Reserve Chairman, WSJ “I don’t think it’s possible to say exactly how this is going to go,” he said. Earlier Mr. Powell said, “I think there’s quite a bit of room to raise interest rates without threatening the labor market.” Mr. Powell suggested that the central bank wasn’t likely to offer any forward guidance or the words officials use to describe their intentions with interest rates over the next few years which has been a central feature of Fed policy.

Kristina Hooper, chief global market strategist at Invesco, WSJ “We need to be prepared for it to be faster and for more substantial moves to be made over the course of the year.” (referring to possible rate increases over the next year)

Fahad Kamal, chief investment officer at Kleinwort Hambros, WSJ “What I’m looking for this earnings season is inflationary pressures and margins–if companies are able to hold on to their profits,” adding “are they able to pass along prices, are they able to maintain pricing power?” As central banks rein in liquidity, maintaining profit margins is particularly important, he added.

Douglas Ramsey, Leuthold Group’s chief investment officer, Barron’s “When there’s this kind of selling intensity, there’s usually another shoe to drop.”

THE NUMBERS

40 Number of largest 100 company pensions funded at 100% or more in 2021, the highest since 2007

27K Average number of comments per day on Reddit’s WallStreetBets main page in November, down from 47,000 a year earlier

$7B McKinsey estimate of financings for electric air-mobility companies in 2021, more than twice that of the previous 10 years

790K OPEC+’s average oil-barrels-per-day shortfall of production goals