Day Traders Diary

1/10/22

An ugly start to the week saved by a tech rebound snapping a four-day losing streak for the Nasdaq Composite. The Nasdaq closed with a gain of 6 points or 0.05% after falling more than 2% earlier in the day. The S&P 500 closed down 6 points while the Dow finished with a loss of 162 points, or 0.45%, also well off session lows.

Large tech stocks were under pressure in early trading but were able to stabilize and then move higher as the day wore on. Nvidia, Tesla and Apple all closed higher after losing ground earlier in the session.

The rough start to the year for stocks has come as interest rates have spiked. The benchmark 10-year Treasury yield briefly traded above 1.8% on Monday morning after ending the year near 1.51%, but settled back below that level later in the day. On Sunday, Goldman Sachs projected the Federal Reserve to hike rates four times in 2022, signaling that Wall Street increasingly expects the central bank to get aggressive in an attempt to curb inflation.

However, the selloff appeared to be nearing key technical levels on Monday. At its lowest point, the Nasdaq was more than 9% below its record closing high from November, putting it on the verge of a correction. JPMorgan strategist Marko Kolanovic said in a midday note that investors should buy the dip in stocks.

Shannon Saccocia, CIO of Boston Private Wealth, said on CNBC's "Closing Bell" that the economy should be able to handle a further rise in interest rates.

JPMorgan CEO Jamie Dimon struck an optimistic tone on Monday, telling CNBC that he expected strong growth this year even though he saw the Fed raising rates more than four times over the course of the year. "We're going to have the best growth we've ever had this year, I think, since maybe sometime after the Great Depression," Dimon told CNBC's Bertha Coombs during the 40th Annual J.P. Morgan Healthcare Conference.  "The market can have its own fluctuations unrelated to the economy, and I think you need this kind of growth to justify the market. We're kind of expecting that the volatility will have a lot of volatility this year as rates go up," Dimon added.

Even with Monday's upturn, stocks are still down sharply for the year. The S&P 500 has fallen for five consecutive days and is down 2% since the start of January. The Nasdaq is down more than 4%.

Elsewhere, Shares of video game publisher Take-Two fell more than 15% after the company announced a deal to purchase Zynga. Apparel stocks Nike and Tapestry fell 5.4% and 4.5%, respectively. Lululemon fell more than 2% after the company said the omicron variant had hurt its fourth-quarter results.

Monday's moves came ahead of a busy week of economic data and central bank news. Fed Chairman Jerome Powell is scheduled to testify Tuesday at his nomination hearing before a Senate panel, while the hearing on Fed Governor Lael Brainard's nomination to the post of vice chair is set for Thursday. While both are expected to be confirmed, the hearings could provide key information about the future of monetary policy.

The consumer price index is set for release Wednesday and is expected to show a year-over-year increase of 7.1%, according to Dow Jones estimates. The producer price index, which measures wholesale prices, is slated for Thursday.

Earnings season also begins this week, with financial heavyweights JPMorgan Chase, Citigroup and Wells Fargo release quarterly results Friday.

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