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Fed News to Prompt Stock Markets Today

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Wednesday, January 26, 2022

Today’s big news comes early this afternoon, when the Fed puts forth its latest advancement in monetary policy. This will be followed by a press conference with Fed Chair Jay Powell, where he will have ample opportunity to explain at what pace tightening will occur. Right now, a relative consensus of market analysts expects the first rate hike in March (at the next Fed meeting after this one), with four (or more) hikes to come throughout this calendar year.

This would be an excellent time for Powell to address investors’ worry. For sure, the Fed is tightening, not easing — and if it were, that would create an entire other scenario of why this is bad news — but the questions are: when, and how much? As Powell himself said during his last presser, ending the asset buyback taper would not necessitate rising interest rates immediately. In fact, the Fed may wish to address the $9 trillion on its balance sheet even before it decides to hike rates.

Again, this is a moment for clarity. Long gone are the days where analysts needed a decoder ring to decipher Alan Greenspan’s cryptic commentary on what the Fed was planning to do; the past three Fed Chairs — Ben Bernanke, Janet Yellen (current Secretary of the U.S. Treasury) and now Powell — have taken steps to help investors understand the Fed’s intentions. Well, with January 2022 currently the worst trading month since the pandemic struck in March 2020, understanding the Fed is exactly what market participants need right now.

Advance Trade in Goods for December hit an all-time high (or low, depending on your perspective) this morning, reaching -$101.0 billion for the first time in history, and up from the already upwardly revised -$98.0 billion. Higher imports than exports — +2% vs. +1.4% — tell most of the story, with volatile month-over-month autos leading the imports, +8.4%. This suggests there may be some back and forth in future prints, though at already historic levels.

Boeing (BA - Free Report) shares are +1.4% this morning on a Q4 bottom line that came in well beneath expectations — -$7.69 per share versus -$0.09 expected — on a $3.5 billion charge on the 787 Dreamliner. This is believed to be a one-time item that investors will look past… for now. Revenues for the quarter were also light — $14.79 billion versus $16.96 billion, for a negative surprise of -12.8%. This marks the eighth miss on the bottom line in its last 15 quarters.

Kimberly-Clark (KMB - Free Report) shares are falling -6% on its Q4 earnings report, even though the company beat on earnings by 2 cents to $1.30 per share (though down from the $1.69 in the year-ago quarter). Revenues also came in higher than expectations, narrowly, to $4.97 billion. But rising costs are creating snags at the paper products manufacturer, and shares are selling even with the markets up overall in today’s pre-market.

Futures are higher this morning. It remains to be seen if this more hopeful stance is requited by the Fed this afternoon, or if we’re simply looking at a dead cat bouncing at this hour.

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