Critical information for the trading day
It’s a Fed day of sorts, with minutes of the last Federal Open Market Committee — the one where they doubled the pace of the taper and released a new dot plot — set for release.
George Saravelos, global head of currency research at Deutsche Bank, says the market is too focused on dots, which get to the question of how much the Federal Reserve lifts interest rates this year. He says the market instead should be focused on the balance sheet, which has more than doubled in two years, to an end-of-year reading of $8.76 trillion.
“How quickly the Fed decides to unwind it will have a big bearing on how financial conditions tighten,” says Saravelos. “A rapid QE unwind would be worse for long-end bonds, EM and equities and potentially slow down the hiking cycle. A very slow unwind would keep long-end yields contained but require more interest rate hikes, in turn with a bigger impact on the [U.S. dollar].”
Saravelos also says the market might be misreading the impact of the omicron coronavirus variant by focusing too much on how the U.S. and Europe are responding, and not enough on China. In the world’s biggest port, Ningbo, there’s a partial lockdown. “We highlighted signs of an easing in supply bottlenecks last month, but some benchmark container indices are making new record highs again. China’s persistence and success in containing omicron over the new few weeks will be critical for the supply side of goods in 2022,” he says.
Another point with respect to omicron is the impact on supply of labor. In London, for instance, nearly 8% has COVID and is stuck at home. The real freedom day, Saravelos says, is when the isolation period is zero, not five days.
The buzz
ADP reported a big 807,000 pop in private-sector payrolls in December. At 2 p.m., the minutes from the FOMC’s last meeting will be released.
The U.S. Centers for Disease Control and Prevention amended its new five-day isolation guidance but didn’t add a testing requirement. U.S. President Joe Biden doubled the order for the Pfizer PFE pill treatment Paxlovid, as French President Emmanuel Macron said his government’s strategy was to “piss off” the unvaccinated. Hong Kong banned flights from the U.S. and seven other countries.
A new coronavirus variant has been found in France that could possibly be more transmissible than the omicron variant.
Beyond Meat BYND shares surged in the premarket, after the company said its plant-based, fried chicken product is coming to Yum Brands’ YUM KFC locations in the U.S. next week.
Sony SONY jumped in Tokyo trade, after it announced a new electric-vehicle unit and rolled out a prototype sport-utility vehicle.
Citi hiked its year-end S&P 500 SPX price target to 5,100 from 4,900.
The market
U.S. stock futures ES00 NQ00 were a bit weaker before the Fed minutes.
After a 17 basis point surge over two days, the yield on the 10-year Treasury BX:TMUBMUSD10Y edged back to 1.65%.
Top tickers
Here are the most popular stock-market tickers on MarketWatch, as of 6 a.m. Eastern.
| Ticker | Security name |
| TSLA | Tesla |
| AMC | AMC Entertainment |
| GME | GameStop |
| NIO | NIO |
| AAPL | Apple |
| NVDA | Nvidia |
| BABA | Alibaba |
| NVAX | Novavax |
| F | Ford Motor Co. |
| AMD | Advanced Micro Devices |