US futures traded flat in the overnight trading session, as the Federal Reserve (Fed) hawks came back in charge following strong job additions, and solid wages growth in the latest US jobs data.

This week the attention will shift from corporate earnings to macroeconomic data, more specifically to latest US consumer price index that could have advanced to 7.3% in the US in January. Fear of a stronger inflation will likely keep the investor appetite limited until the data release.

Chinese stocks rallied as Chinese investors returned from a week-long Lunar New Year break, and they had some gains to catch up with. Plus, the better-than-expected Caixin services PMI offered a roaring start to the Tiger Year, but the rest of Asia looks much less promising with stock in Japan, Hong Kong and Australia trading in the red due to the stronger hawkish Fed expectations.

The US dollar rebounded from its 100-DMA, Bitcoin finally cleared the $40K resistance.

In this environment of still low yields, rising inflation & uncertainty, investing in high dividend payers & staking coins could be interesting.

Facebook got severely hammered yesterday, weighing badly on the S&P500 and Nasdaq. But Amazon rallied near 20%, hinting at a uptick note in tech stocks at the weekly closing bell.

A last thing to watch before the bell is the US jobs data, make sure you don’t get carried away with potentially ugly NFP number, as wages growth is what matters the most for Fed expectations.

The wages growth will be more important than the number of nonfarm jobs added to the US economy at today’s release, because first, we know that the December numbers are heavily shaken by the omicron wave and it’s not representative of the overall health of the US jobs market, and second, even if we see a negative NFP print, it won’t matter much for the Federal Reserve (Fed) expectations!

Elsewhere, the barrel of crude finally pulled out the $90 resistance, the EURUSD is preparing to test the 1.15 after Lagarde’s confession that inflation in Europe will last longer than previously thought.

March update to projections will be decisive in what the ECB will do next, but we already know that March projections will include high inflation, and will probably say ‘raise the rates, Christine!’.

Yesterday’s ADP data showed that the US economy lost some 300’000 private jobs in December, versus 185’000 job additions expected by analysts, but no one cared.

Google jumped by more than 7% yesterday to a fresh record high on the back of strong earnings. Nasdaq gained for the fourth consecutive session adding another 0.50% to its gains. But don’t uncork the champagne just yet! Because the Nasdaq futures are trading more than 2% lower at the time of writing. Disappointing Facebook results, and a 23% plunge in Meta shares in the afterhours trading calls for a red session in the US.

Amazon is the last FAANG stock to announce earnings today, and the company is expected to reveal a second consecutive month of earnings decline. Ouch.

Inflation in the Eurozone hit 5.1% in December. So, all eyes are on Christine Lagarde and what she has to say at today’s press conference. Will she insist that inflation is transitory or will she finally accept the defeat, and call it a problem?

Across the Channel, the Brits will probably raise their interest rates by another 25bp for the second time at today’s meeting.

Elsewhere, OPEC maintained its production increase target at 400’000 barrels per day and the consensus is a further advance in crude oil to $100pb in the foreseeable future.

US stocks gained for the third consecutive session, and the gains seemed more stable this time, as the VIX index retreated below the 22 mark. The Federal Reserve (Fed) storm is coming to an end, with most hawkish expectations already factored in the asset prices, and the strong corporate earnings help equities bind up their wounds.

We have two important events on today’s macro calendar: the OPEC meeting and the US ADP report.

OPEC: no need to hold your breath…

OPEC will discuss whether and by how much they should increase its oil output at today’s meeting.

But whatever happens, crude prices are poised for an advance towards the three-digit levels in the coming months given that global glut declines faster than expected due to a stronger recovery in demand, and ongoing supply constraints.

PS: Higher energy costs also mean a higher inflation, and a tighter Fed, but that reasoning has been widely priced in already.

US jobs don’t really matter

According to the latest JOLTS data, more than 10 million Americans quit their jobs in December and today’s ADP data is expected to reveal that the US economy added 185K new private jobs in the final month of 2021 versus more than 800’000 printed a month earlier.

Yet we know that the December ADP figure could come much smaller than that; we could even see a negative print today as the omicron may have taken a severe toll on the US jobs market in December. But it won’t matter for the Fed expectations!

The S&P500 finished January with a strong two-day rally, but the index is still more than 5% lower than where it kicked off the year, having recorded its worst month since March 2020. Nasdaq closed yesterday’s session up by more than 3% for the second day in a row.

Nasdaq is already up by almost 9% from the January dip. Yet, 3-4% gains are often sign of high volatility and stress, and they could easily melt down in no time. What we need to see now is smaller but more sustainable gains to call the end of the January selloff.

Good news is that the Federal Reserve (Fed) officials start sending softer messages and the hawkish pricing is mostly done, which could lead to some more recovery in US stocks, especially of the upcoming earnings are strong, and in Bitcoin.

Exxon, Google, General Motors, AMD and EA are among the most closely monitored companies due to announce their Q4 earnings.

US stocks recorded a last-minute rally on Friday, but gains remain on jeopardy as the hawkish Fed expectations and the Russia-Ukraine tensions are weighing on the risk appetite.

The geopolitical tensions, in fact, push energy prices higher, further boosting the inflation fears and the Fed hawks. The consensus now is that the Fed would raise the interest rates five times this year.

In this environment, US dollar is certainly a good place to park, while gold is doing surprisingly poorly despite having most factors that would normally support a better pricing on its side.

In the stock markets, value stock investors are finally being praised for their patience. At today’s episode, I have an interesting comparison of Warren Buffet and Cathi Wood’s performances over the past two years!

US equities went from gains to losses, yet again, as the Ukrainian tensions, which support the rally in energy prices, and by doing so further boosts the inflation expectations and the Fed hawks didn’t do good to the overall market mood.

US dollar extended rally as the US yields continued pushing higher. The EURUSD slipped below the 1.12 mark.

Although it has been a blood-red month for the US equities, the FTSE 100 managed to eke out 3% gains in January, as a sign that the British blue-chip index is in a good place to be the winner of the finally-happening reflation trade.

In equity news, Tesla tanked more than 11% yesterday, as investors focused on the warnings that chip shortage could take a toll on performance this year, rather than the record-high profits (which were already factored in the stock price).

Apple, on the other hand, gained 5% in the afterhours trading as the results showed that the sales soared despite the chip shortage worries, helping Apple announce a better-than-expected revenue in the most important holiday quarter!

Jerome Powell didn’t really sooth investors’ nerves at yesterday’s policy statement. He said that the Federal Reserve (Fed) won’t refrain from back-to-back rate hikes to get the inflation situation straight. His words sent the US stocks lower, and the US dollar higher.

Today, the US will reveal its latest GDP data, and the expectation is that the US may have grown some 5.5% in the Q4. Any positive surprise could further revive the Fed hawks, while any negative surprise would barely tickle the doves, unless the numbers are real ugly, which I doubt.

In the FX, the US dollar had a strong session on the back of a decidedly hawkish Fed. Bitcoin came under selling pressure again, and appetite in US crude remained strong.

In corporate news, Tesla announced record profits, Microsoft eked out gains despite a negative kneejerk reaction to its Q4 results & Netflix failed to attract dipbuyers.

Today, it’s Apple’s turn to confess, and any weakness could be a buy opportunity, says Morgan Stanley.

Trading in the US equities remains hectic, unpredictable and full of surprises. The escalating tensions in the Ukrainian border, Biden threatening Putin with personal sanctions, IMF cutting the US and Chinese growth outlooks, combined to the hawkish Federal Reserve (Fed) expectations are mostly responsible with the rising volatility and confusion among investors.

Yet it could soon be time to chill for the Fed hawks, as the Fed hasn’t got anything to gain in sending out hawkish messages today: slaughtered equity markets won’t help them to get the inflation situation straight. On the contrary, a deep dive in the financial markets would only refrain the Fed from doing what it’s got to do and worsen inflation.

Strong Big Tech earnings on the other hand barely satisfy investors, as anything less than perfectly ideal gets the stocks to drop like flies.

Tesla is the next to announce its Q4 earnings.

Elsewhere, Bitcoin recovers yet the downside pressures are unlikely to fade, as the falling chip inventories may become a greater headache for the crypto-industry.

The S&P500 and Nasdaq dived 4% before reversing losses and closing the session in the green. But yesterday’s rebound doesn’t mean the equity markets are out of the woods just yet. On the contrary, the rising volatility hints at further market turbulence ahead, as investors are worried aout the Fed tightening, the Ukrainian war threat, and some unachieved goals on Biden’s political agenda as the Build Back Better & Chinese trade deficit.

The FOMC starts its two-day meeting today, yet given the bloodbath in equity markets, the policymakers could refrain from reviving the Fed hawks.

But even with an eventually softer Fed statement, and some market correction, there is a slim chance we see meme stocks, SPAC deals, or highly speculative names doing well in an environment of tighter Fed liquidity. There is, on the other hand, a better chance for companies like Apple and Microsoft to navigate through a high turbulence market.

So, the Fed tightening will certainly support the reflation trade, but it will more importantly trigger a flight to quality.