Investors reviewed valuations after the Federal Reserve’s latest hint that it will move aggressively if prices remain elevated, and stocks in the United States sank lower after swinging between gains and losses.
From high-priced growth stocks to newly-public enterprises with limited earnings track records, the hawkish stance hit the riskiest of assets. Treasuries continued their fall; however, the pace of the decline slowed as the 10-year rate hovered around 1.73%.
Officials discussed shrinking the Fed’s balance sheet as another way to revert to the easy monetary policy of the post-pandemic era.
The Labor Department’s widely anticipated employment report on Friday indicates a significant tightening of the labor market. The unemployment rate is expected to fall to a 22-month low of 4.1% from 4.2% in November.
Overall US Stock Market
During the week, the S&P 500 was hit 1.9 percent sparked by Fed meeting minutes that suggested the central bank is poised to hike rates sooner and higher than previously predicted. Overall, the index finished down 2.12%.
Stocks sensitive to the interest rates surged a day after minutes from the Federal Reserve’s December meeting revealed that the central bank is preparing to withdraw its economic stimulus sooner than expected.
As investors shifted away from high-priced stocks, several tech firms continued to fall. As crude prices increased, energy stocks contributed to bolstering the market.
Significant Gain – Allbirds (NASDAQ: Bird)
Morgan Stanley raised the stock to overweight from equal weight, causing shares of the shoe business AllBirds (NASDAQ: Bird) to rise. Allbirds’ stock currently appears to be cheap, according to the firm, following a steep decline that pushed shares below their November IPO price.
Allbirds is a new firm, having launched its initial public offering (IPO) in early November of last year for $15 per share. The stock of the shoe store took off after being positioned as a lifestyle brand that uses naturally produced materials. It first jumped to a high of more than $32 per share. That didn’t last long, and the stock has been steadily declining since then, with the shares now trading below its IPO price.
Allbirds is a small company but is rapidly expanding. For example, sales in the third quarter of 2021 surged by an astonishing 33% year over year. Based on this, Morgan Stanley set a price estimate of $17 per share.
Major Loss – Netflix (NASDAQ: NFLX)
Netflix (NASDAQ: NFLX), the world’s most popular streaming video service, faces mounting concerns on Wall Street that it may fail its fourth-quarter membership growth forecasts.
Netflix shares fell below a critical support level. The stock of Netflix has fallen below its 200-day moving average line. The stock of Netflix completed the regular session with a loss.
When compared to companies outside of the streaming space, however, NFLX’s performance is less impressive. In fact, in 2021, the stock underperformed the S&P 500.
Nevertheless, Netflix outperformed its rivals in 2021, with a cumulative growth rate of about 16%. Other companies in the video streaming industry have seen lower returns.
US Commodity Market
Oil
On rising turmoil in OPEC, Kazakhstan and supply interruptions in Libya, oil prices jumped by 2% on Thursday, extending their new year’s gain.
After reaching their highest level since late November, Brent crude futures increased $1.19 cents, or 1.5%, to close at $81.99 a barrel. The price of West Texas Intermediate (WTI) crude in the United States increased by $1.61, or 2.1%, to $79.46. The contract reached an all-time high of $80.24 during the session.
The global benchmark Brent’s six-month backwardation was around $4 a barrel, the highest it had been since late November. Backwardation is a market structure in which current prices trade at a premium to futures prices. It is generally a positive market indicator.
Gold
Gold edged higher on Friday, hovering near a two-week low touched the day before after the World Health Organization’s (WHO) chief stated that the Omicron form cannot be classified as ‘mild,’ but higher yields capped bullion’s gains.
Spot gold had risen 0.2% to $1,791.73 per ounce. Gold futures in the United States were up 0.1% at $1,791.70.
The precious metal was on track for its biggest weekly drop since late November, falling around 2%.
Byron Wien, a legendary investor, predicts that gold will increase by 20% this year as investors flock to the yellow metal to safeguard against inflation and market turbulence.
As an affiliate, I’ve partnered with TradingView to bring you their unique stock screener that helps filter the best and most profitable trading opportunities. Get a free trial and access their charting platform with market-leading features.
Featured image credit: Shutterstock