Weekly Market Review & Analysis For January 31, 2022

The significant market indices grew over 1% during the weekly session and recovered from an oversold situation despite higher expectations for rate hikes. The Nasdaq Composite was the gain leader with an increase of 2.4%, followed by the S&P 500 with +1.6%, small-cap Russell 2000 with +1.7%, and the Dow Jones Industrial Average, posting +1.1%.

Eight of the eleven S&P 500 market sectors ended the week with positive numbers, led by the consumer discretionary with +3.9%, and the financials sector with +3.5%, which posted significant gains. The materials sector and real estate sectors with -0.2%, and the communications services sector with -0.3% were the sectors that finished the week on a low note with only nominal losses.

The market was able to take advantage of a lot going for in the last week, such as the month's end rebalancing process, the first of the month flows, a more stable technical position, an anxiety about not being able to take advantage of further growth, more favorable than anticipated and feared report on earnings.

After their earnings reports, Amazon.com (AMZN) and Alphabet (GOOG) had tremendous market gains. However, they were not as significant as Snap's (SNAP), which offered investors a massive sigh of relief following Meta Platforms (FB) plunging 26% after its disappointing earnings announcement. SNAP came off with an increase of 60% after falling 24% before its earnings report.

The expectation of the Fed to increase the federal rates by 50 basis points during March grew significantly after the January employment data revealed a remarkable increase in jobs and wage increases that were higher than expected. As per CME's FedWatch Tool, the likelihood of this happening increased to 36.6% on Friday, against 14.3% a week earlier.

In a similar vein, both the ECB (European Central Bank) and the BOE (Bank of England) acknowledged the inflation risk in the economy. They both recognized the dangers of inflation. BOE responded accordingly with a 25 basis point increase for the second time in a row. Likewise, the ECB declared that it would not exclude a rate hike, despite stating earlier was a far-fetched possibility.

To give you an idea, The Prices Component part from the last month ISM Manufacturing Index increased from 68.2% to 76.1%, and the West Texas Intermediate (WTI) crude oil futures market reached $92 per barrel closing $92.30, that is +2.08, or 2.3% at the trading week session.

U.S. Treasury yields have risen due to the rising inflation rate and high Fed expectations. The market yield for the Two-year note increased 15 basis points higher to close at 1.32%, while the Ten-year yield also climbed the same percentage, bringing it to 1.93%. The U.S. Dollar Index fell 1.9% to close 95.44 in the face of the stronger Eurodollar.