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JPow’s Back At It Again

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Good evening, everyone! The market showed signs of strength, but we’ll keep taking it one day at a time. 🤞

Each major index registered gains on Tuesday. The Nasdaq led the way, rallying 1.5%. The Russell 2K ripped 1.05% while the S&P 500 surged 0.92%. Is this just a relief rally or does the market have legs? 🤔 Place your bets…

The market clicked into gear after Fed Chairman Jerome Powell reaffirmed the central bank’s attempts to keep inflation in check. More on this below.

Bitcoin is nearing the infamous death-cross, a bearish technical pattern which signals potential lower prices to come. 💀 To confirm the pattern, the declining 50-day moving average (blue) needs to cross below the 200-day moving average (yellow). So far, $BTC.X is doing its best to avoid the pattern, +2.1% today.

The energy ETF $XLE ignited 3.4% after last week’s stellar performance. 🌟 WTI Crude Oil climbed 3.63% to November highs. 💪 🛢

Virgin Orbit Holdings took off 31.3% to post-merger highs after opening the launch window for its third commercial flight. 🚀 Registration for launch into Low Earth Orbit opens tomorrow, Jan 12. 

$WLL waltzed 9.4%, $LCID leaped 9%, and $MATIC.X marched 11.6%.

Here are the closing prices: 

S&P 500 4,713 +0.92%
Nasdaq 15,153 +1.41%
Russell 2000 2,194 +1.05%
Dow Jones 36,252 +0.51%

Earnings

Q3 is out. Q4 is in.

Q3 is out. Q4 is in. Featured Image

Q3 was a beefy quarter for earnings. 💪 Earnings grew 42.6% YoY and revenue grew 17.0% YoY among S&P companies, with the energy sector taking the lead. Almost every sector did better than expected, helping the index best analyst estimates overall. Though Q3 is a distant memory, we need to put our earnings cap on for the real all-star of 2021: Q4 earnings!! There’s no better time for them to come, especially with all the FUD in the equities market. 🥳

This week marks the formal start to Q4 earnings (yes, 20 companies in the S&P 500 have already reported.) Many of those names will be big bank stocks, reporting on Friday. Financials is expected to greatly benefit from rising interest rates and new macro policy. Banks have been retreating from old-fashioned sources of income, like high fees, because of competition with fintech and neobanks. However, banks will likely benefit in the form of higher interest income. 💰

Ultimately, banks will be a huge indicator of what’s to come. The narrative for Q4 earnings will be companies facing threats of slowed earnings and revenue growth; the pandemic pressed “reset” on business operations, which made for fantastic YoY earnings and revenue growth. In 2022, those exciting double-digit growth figures might start to look a lot less appetizing to investors. 🤢 Refinitiv estimates earnings growth of 22.4% YoY and revenue growth of 12.1% for the quarter. Both figures could increase, as they did in Q3, thanks to energy names.

Overall, Q4 will be an indicator for FY 2022. So far, Refinitiv is forecasting a 7.6% growth rate in the first quarter of 2022. However, much of that growth is coming from energy companies, and a lot of that growth may already be priced in.

You can keep track of Q4 earnings as they happen on Refinitiv Lipper’s “This Week in Earnings,”updated every Friday. We’ll touch on earnings throughout the quarter. Keep your eyes peeled. 🕵️‍♀️



Policy

JPow Walks Inflation Tight-Rope in Congress

JPow Walks Inflation Tight-Rope in Congress Featured Image

At his confirmation hearing in front of Congress today, Fed Chair Jerome Powell eased concerns and assured the public that the U.S. is ready for tighter monetary policy. 💡

To tackle high inflation, Powell restated the Fed’s plan to conduct interest rate hikes and taper monthly bond purchases — the market reacted well to the news, recovering some of yesterday’s losses. Powell’s hearing suggested that it is likely he will be appointed for a second term in his current position.

Previously, investors worried that the Fed’s aggressive tightening of monetary policy would result in a ‘triple threat’ that could damage the economy while reducing inflation. Specifically, investors were concerned that the Fed would reduce bond buying, taper asset purchasing, and increase interest rates all at once, which could have unintended consequences in the broader economy. Today, however, Powell emphasized his commitment to reducing inflation while balancing the greater economy, which somewhat appeased investors.

Powell stated “As we move through this year … if things develop as expected, we’ll be normalizing policy, meaning we’re going to end our asset purchases in March, meaning we’ll be raising rates over the course of the year. At some point perhaps later this year we will start to allow the balance sheet to run off, and that’s just the road to normalizing policy.

Powell also revealed the Fed’s new ethics code in an effort to battle conflicts of interest among governing officials. You can watch a livestream of today’s hearing here. 🦅 🇺🇸


Stocks

Robinhood Smacked with FINRA Fine

Robinhood Smacked with FINRA Fine Featured Image

Back in June 2021,Robinhood was ordered to pay a $57 million fine by financial regulator FINRA for “outages and misleading customers” during market volatility in March 2020. An additional $13 million in restitution was included as part of the penalty, bringing the total fine to over $70 million. It was, and still is, the largest FINRA penalty imposed. 

It also wasn’t the first fine against the controversial new-age broker-dealer, and obviously wouldn’t be the last. FINRA looks prepared to make Robinhood pay up for its role in the January 2020 stock market volatility, during which the broker-dealer froze trading in retail-popular stocks like GameStop, AMC Entertainment, American Airlines, and Koss. The regulator has ordered Robinhood to pay $29,460.77 to a 27-year-old truck driver from Connecticut who suffered significant investment losses due to Robinhood’s decision to limit trading. 🤭 At face value, $29,000 isn’t much to a $14 billion company. However, it’s a first-of-its-kind judgment related to the January market volatility. When you start to consider how many tens of thousands of other cases might be filed with the regulator, $29,000 might be the least of Robinhood’s problems. 😬

At least, that’s what MarketWatch opinions writer Thornton McEnery claims in a new piece. McEnery suggests that this fine might open the floodgates for a flurry of other big settlements. ❄️ While there are several class action suits filed against Robinhood and other companies speculated to be involved in the “stock freeze,” FINRA settlements could bring quicker resolutions for retail investors wronged by the broker giant. Based on the sheer size of the January volatility episode, there could be a lot more high-dollar FINRA settlements incoming.

$HOOD is down 53.3% from IPO, trading at $16.41/share. At just $14 billion, Robinhood even feels like a potential acquisition target for a larger finserv company such as Charles Schwab, Vanguard, or Ameriprise… but that’s just speculation. 🤷 Take it for what it’s worth.


Bullets

Bullets from the Day

Citadel Securities is now valued at $22 billion after receiving its first-ever outside investment. Ken Griffin’s Citadel Securities just closed a $1.15 billion deal with VC firm Sequoia Capital and crypto investor Paradigm. Citadel Securities is a separate entity from Citadel, Griffin’s hedge fund, and it touches about 27% of all shares exchanged in the stock market every day. The investment intends to help Citadel boost its global operations, indicating a possible IPO. Read more in WSJ.

Bitcoin is approaching the dreaded ‘death-cross.’ The ‘death-cross’ is a chart pattern that appears when an asset’s price over the last 50 days dips below its 200-day moving average. The ‘death cross’ is supposedly a bearish indicator, but Bitcion has approached ‘death cross’ territory twice before in the last two years without serious consequences for its price. Read more in Bloomberg.

Meta just disclosed the newest member to its board of directors — Doordash founder and co-CEO, Tony Xu. Meta said Xu’s appointment is ‘effective immediately.’ Zuckerberg commented on Tony Xu’s new role, emphasizing the CEO’s strong ability to navigate commerce as Meta develops its commerce strategy. Read more in TechCrunch.