• DJI slightly positive, S&P 500 slightly lower, Nasdaq drops about 0.5%
  • Real estate is the biggest winner in the S&P sector; lowest svcs comm
  • The Euro STOXX 600 index slips ~1.8%
  • Dollar, crude, gold, bitcoin all lower
  • 10-year US Treasury yield ~1.76%

January 21 – Welcome home to real-time market coverage from Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com


The US economy has taken a few steps back as it returns to full recovery from the steepest and most brutal recession in history.

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Recovery trackers from economic analyst firm Oxford Economics (OE) and brokerage Goldman Sachs (GS), which use different groups of metrics to gauge the state of the US dancing towards “normal,” reveal both a setback, with the healthcare picture souring at the hands of Omicron’s COVID variant and a hawkish Fed kingpin identified as the culprits.

“Health conditions were at their worst in 10 months, while demand weakened sharply,” writes Oren Klachkin, chief US economist at OE, who said the Omicron/Fed double whammy sent the OE Recovery Tracker at its lowest level since last April.

“Financial conditions have tightened and mobility has softened,” added Klachkin, who then gave reason for optimism, saying that “stronger employment and output data indicate that below the surface , the recovery maintains a positive momentum”.

The chart below, courtesy of OE, shows a history of the recovery broken down by its six main indicators: financial, mobility, production, employment, demand and health (click to enlarge):

Recovery Tracking

As for GS, senior analyst Jan Hatzius said that while the peak in COVID-related hospitalizations is currently much higher than the previous two waves, Omicron is driving a lower percentage of hospitalizations and deaths.

But sick workers have made their absence felt.

“The share of the adult population not working for virus-related reasons tripled” in the first month of the year, writes Hatzius, noting that workers in contact with the public in education and health have seen an average absenteeism rate of 10%, and airline staff in mandatory isolation due to positive COVID test results caused “an average of 8% of flights canceled each day between December 27 and January 7 “.

Virus fears are influencing consumer behavior, with 59% of adults rating health risks from normal activities as ‘moderate’ to ‘significant’, a gain of 15 percentage points since joining GS, says GS ‘Omicron.

Hatzius cites a marked drop in TSA throughput and Open Table’s measurement of seated diners as evidence of lower activity in virus-sensitive departments.

The week ahead should provide even more clarity regarding the strength of the current headwinds and the ability of the economy to withstand them.

The FOMC’s statement and Q&A session at the end of its two-day monetary policy meeting will be the star of the show, with the Commerce Department’s first jab at fourth-quarter GDP, PCE inflation, spending consumption and new home sales filling out the supporting cast.

(Stephen Culp)



Wall Street’s major indexes continue to fall early Friday and are on course for at least their third consecutive week of declines, after a weak forecast from Netflix sent shares of the streaming company and its peers tumbling.

Indeed, the week was particularly difficult for the Nasdaq (.IXIC). The tech-laden index is down more than 6%, putting it on pace for its biggest weekly percentage decline since a 12.6% collapse in March 2020. Beneath the surface, chips remain particularly weak. The Philadelphia SE Semiconductor Index (.SOX), down more than 11%, is also on course for its worst week since a 16% slump in March 2020.

Meanwhile, despite a sharp downward reversal in the 10-year US Treasury yield, which saw it slide from Wednesday’s high of 1.9020% to the 1.75% zone on Friday, growth (.IGX) is on course to underperform the value (.IVX) on the day and for the fourth week in a row. The IGX/IVX ratio is poised for its biggest monthly decline since February 2001.

Here is where the markets are at the start of the trade:


(Terence Gabriel)



Tensions between Russia and Ukraine are attracting the attention of investors, who are considering how any turmoil will affect markets.

BCA Research strategists assign a 50/50 chance that diplomacy in the region will fail, leading to a “minor invasion” of Ukraine, as well as a 5% chance that Russia will invade the entire country. US Secretary of State Antony Blinken said Friday after talks with Russia’s foreign minister that Moscow would face a “swift, stern and united response” if it invaded Ukraine.

In a memo on Friday, BCA strategists imagined a scenario where Russian actions would result in sanctions, with Russia retaliating in a way that worsens Europe’s “energy crisis.”

“For investors, this means that US-Russian tensions pose a tactical threat to European risk assets,” the BCA strategists wrote.

Historically, the strategists said, US risk assets have outperformed their foreign counterparts when global risk rises.

“The relatively more defensive nature of the US dollar and US equities means that US equities and the greenback will outperform in a high risk environment,” the strategists said.

(Lewis Krauskopf)



The Nasdaq Composite (.IXIC) ended Thursday down nearly 12% from its record close on Nov. 19. And although it’s only the early days of 2022, IXIC’s 9.5% decline so far puts it on track for its biggest annual decline since 2008.

To note, on a daily basis, the IXIC ended Thursday at its most oversold level since the panic of February/March 2020 Read more:


Therefore, the composite looks ripe to rebound at any time. However, traders will assess the structure and character of any rally, as sudden strength could simply turn out to be a reaction to help ease the oversold condition, in what will always turn out to be a continuing downtrend.

For example, during the August/December 2018 and February/March 2020 busts, the largest oversold readings on a daily basis occurred in the early stages of the decline. It was only when the IXIC made new lows, accompanied by a convergence of bullish momentum, that true lows were then found.

Meanwhile, a number of internal Nasdaq metrics are once again particularly weak. The Nasdaq New High/New Low (NH/NL) index fell 16.1% – click here: read more. The Nasdaq McClellan Summation (McSum) plunged to -5,276 – click here: read more. The Nasdaq’s weekly advance/decline (A/D) ratio is 0.79. These metrics have yet to stabilize, but have the potential to hit washed-out levels at any time.

That said, when looking at the annual Bollinger Band (BB) chart of the composite, the downside still seems to be looming. The IXIC still needs to fall to at least 13,645 to get back below the upper yearly band. Click here: find out more

At this level, the composite index would be down 15% from its record close. And if its nine-year streak of annual closes above the annual top BB is to end, 2022 will likely see some venerable roadrunners, like tech (.SPLRCT), chips (.SOX), and FANG (.NYFANG), turn out to be killed on the road.

(Terence Gabriel)



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Terence Gabriel is a market analyst at Reuters. Opinions expressed are his own.

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