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Weekly Recap | January 31, 2022

Weekly Recap | January 31, 2022

February 01, 2022
Weekly Recap

January 24-28, 2022 Recap

Stocks Snap Three Weekly Losses

Equities End Positive
Following strong Friday gains, all three major U.S. equity indices posted their first weekly gains of the new year. The S&P 500 mounted a 2.4% rally on Friday after briefly reaching intra-day correction status, down more than 10% from its January 3 record high. Federal Reserve policymakers confirmed Wall Street’s hawkish interest rate outlook last week, signaling rate liftoff ahead at its March policy meeting. Amid the shift, investors have favored less expensive cyclical (value-oriented) companies that are more economically sensitive. Major economic releases this week include key readings on manufacturing and services activity as well as Friday’s all-important nonfarm payrolls report for January.

For the Week…
The S&P 500 gained 0.79%, the Dow Jones Industrial Average advanced 1.34% and the Nasdaq Composite finished barely positive, up 0.02%. The Nasdaq gained 3.1% on Friday after being down as much as 4.9% earlier in the session, marking a stunning 8% intra-day revival.

Earnings Season Progresses Positive
Around a third of S&P 500 member companies have reported 4Q earnings results, so far totaling an impressive blended earnings growth rate of 24.4%. 77% of reporting firms have surpassed earnings expectations (in-line with the five-year average). Overall earnings growth is projected to slow to the mid-single digits in the first half of 2022.

Five Sectors Finish Positive
Six of the 11 major sectors ended negative last week, with Industrials
(-1.47%), Utilities (-1.35%) and Consumer Discretionary (-0.95%) falling the most. Real Estate (-0.20%) declined the least, while Energy (+5.09%), Technology (+2.27%) and Financials (+1.36%) gained the most.

Treasury Yield Curve Flattens
Despite intense day-to-day volatility last week, benchmark 10-year Treasury yields ended only slightly higher last week, gaining around two basis points to end Friday at 1.777%. With deeper pricing declines at the shorter end of the curve (two-year notes climbing to 1.17%), the overall yield curve ended the week near its flattest level in over a year. The U.S. Dollar Index surged 1.7% last week, its largest period gain since mid-June 2021. U.S. WTI crude oil gained nearly 2% last week, ending Friday at $86.82/barrel.

The Latest from @CeteraIM

Recovery Indicators Improve

Trading Volatility Jumps

Financials Underperform

Economic Calendar

Monday, January 31
MNI Chicago-area PMI, Dallas Fed Manufacturing Activity.

Tuesday, February 1
IHS Markit & ISM Manufacturing PMIs, JOLTS Job Openings, Construction Spending, Vehicle Sales.

Wednesday, February 2
Mortgage Activity, ADP Private Payrolls.

Thursday, February 3
Jobless Claims, Labor Costs, Worker Productivity, IHS Markit & ISM Services PMIs, Durable Goods Orders.

Friday, February 4
Nonfarm Payrolls, Unemployment Rate, Hourly Earnings.

U.S. economic growth accelerated in the fourth quarter. Real GDP increased by 6.9% annualized, exceeding expectations (+5.3%) and the prior quarter (+2.3%). While government spending was a drag on growth, business investment and consumer spending pushed growth higher in the fourth quarter. For the year, the economy grew 5.7%, which was the highest rate of GDP growth in a calendar year since 1984. The IMF and the Federal Reserve project U.S. growth will slow to 4% in 2022.

This report is created by Cetera Investment Management LLC. For more insights and information from the team, follow @CeteraIM on Twitter.

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The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ.

The S&P 500 is an index of 500 stocks chosen for market size, liquidity and industry grouping (among other factors) designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe.

The NASDAQ Composite Index includes all domestic and international based common type stocks listed on The NASDAQ Stock Market. The NASDAQ Composite Index is a broad based index.

The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe and is a subset of the Russell 3000 Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership.

The Russell 3000 Index measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market.

The Russell Midcap Index measures the performance of the mid-cap segment of the U.S. equity universe and is a subset of the Russell 1000 Index. It includes approximately 800 of the smallest securities based on a combination of their market cap and current index membership.

The Bloomberg Barclays US Aggregate Bond Index, which was originally called the Lehman Aggregate Bond Index, is a broad based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government–related and corporate debt securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS and CMBS (agency and non-agency) debt securities that are rated at least Baa3 by Moody’s and BBB- by S&P. Taxable municipals, including Build America bonds and a small amount of foreign bonds traded in U.S. markets are also included. Eligible bonds must have at least one year until final maturity, but in practice the index holdings have a fluctuating average life of around 8.25 years.

The Bloomberg Barclays US Corporate High Yield Index measures the USD-denominated, non-investment grade, fixed-rate, taxable corporate bond market. Securities are classified as high yield if the middle rating of Moody's, Fitch, and S&P is Ba1/BB+/BB+ or below, excluding emerging market debt. Payment-in-kind and bonds with predetermined step-up coupon provisions are also included. Eligible securities must have at least one year until final maturity, but in practice the index holdings has a fluctuating average life of around 6.3 years.

The Bloomberg Barclays US Municipal Bond Index covers the USD-denominated long-term tax exempt bond market. The index has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds, and prerefunded bonds. Eligible securities must be rated investment grade (Baa3/BBB- or higher) by Moody’s and S&P and have at least one year until final maturity.

The MSCI EAFE Index is designed to measure the equity market performance of developed markets (Europe, Australasia, Far East) excluding the U.S. and Canada. The Index is market-capitalization weighted.

The MSCI Emerging Markets Index is designed to measure equity market performance in global emerging markets. It is a float-adjusted market capitalization index.

The Bloomberg Commodity Index is a broadly diversified index that measures 22 exchange-traded futures on physical commodities in five groups (energy, agriculture, industrial metals, precious metals, and livestock), which are weighted to account for economic significance and market liquidity. No single commodity can comprise less than 2% or more than 15% of the index; and no group can represent more than 33% of the index.

The S&P GSCI Crude Oil Index is a sub-index of the S&P GSCI, provides investors with a reliable and publicly available benchmark for investment performance in the crude oil market.

The S&P GSCI Gold Index, a sub-index of the S&P GSCI, provides investors with a reliable and publicly available benchmark tracking the COMEX gold futures market.

The U.S. Dollar Index is a weighted geometric mean that provides a value measure of the United States dollar relative to a basket of major foreign currencies. The index, often carrying a USDX or DXY moniker, started in March 1973, beginning with a value of the U.S. Dollar Index at 100.000.