U.S. stocks closed higher after a late rally capping another volatile session. Strong earnings from Apple were credited for the Nasdaq closing more than 3% higher. 

The S&P 500 added 2.4% for its best session since June 2020, the Dow Jones average swung from an early 350-point loss to end with a 565-point gain. 

 Regardless, the Nasdaq is still heading for its worst month since 2008. 

The wild swings we experienced were the push/pull factors from higher rate hikes expectations, as well as strong corporate earnings. 

Analysts have raised their 2022 profit estimates by roughly $1 to $221.4 a share this year. About 80% of companies that have reported earnings so far, during this season, have beaten projections. While S&P 500 profits were estimated to expand 22% in the fourth quarter – which is half the rate seen in the previous period – that is still more than twice as fast as the 10-year average, according to data compiled by Bloomberg Intelligence. 

On the flip side, the new consensus for Fed hikes is now 5 hikes for this year. 

For the week, the S&P and Dow rose roughly 1% while the Nasdaq ended flat. 

	Last	Change	%Change
Dow Jones	34,725.47.	+564.69.	+1.65%
S&P 500	4,431.85	+105.34.	+2.43%
Nasdaq Comp	13,770.57	+417.79.	+3.13%
U.S. 10Y	1.77%
VIX	27.66	-2.83	-9.28%

I found it interesting that Bank of America Corp. Strategists, led by Michael Hartnett, cited “zero capitulation in equity positioning.” The analysts, who track EPFR Global data, said stock mutual funds and exchange-traded products took in $17.1 billion in the week to Jan. 26 — the day when the Fed announced its policy decision. 

This may suggest that the volatility we are seeing may be coming from mostly short-term investors, fast money, and managed funds, which use algorithmic computer trading. 

The rally towards the close has put stocks into a more positive position but we would probably need a confirmation rally on Monday to support this move. As we are still below the 200-day moving average for S&P, closing above it with strength could signal a rejection of the lows. However, with the markets trading like a yo-yo, it would not be a surprise if we head back down again after that. 

We have key earnings this week from Alphabet, Ford Motor, AMD, and Qualcomm, which could provide more evidence of strong corporate earnings… or maybe not… 

All I can say for this week is to prepare yourself for more volatile sessions and keep new positions small and tight.  

Finally, I would like to wish everyone Gong Xi Fa Cai! May you be blessed with Good Health and Prosperity! 

Source: CBOE, Bloomberg  

This commentary is written by James Gomes 
James has been in the finance industry for over 30 years and most recently worked for a large U.S. bank for more than 20 years. 

Disclaimer 
While every effort has been made to ensure the accuracy of the information in this document, the DOO Group does not warrant or guarantee the accuracy, completeness or reliability of this information. The DOO Group does not accept responsibility for any losses or damages arising directly or indirectly, from the use of this document. The material contained in this document is provided solely for general information and educational purposes and is not and should not be construed as, an offer to buy or sell, or as a solicitation of an offer to buy or sell, securities, futures, options, bonds or any other relevant financial instruments or investments. Nothing in this document should be taken as making any recommendations or providing any investment or other advice with respect to the purchase, sale or other disposition of financial instruments, any related products or any other products, securities or investments. A decision to invest in financial instruments, any investment related products or any other products, securities or investments should not be made in reliance on any of the statements in this document. Before making any investment decision, prospective investors should seek advice from their own financial advisers, take into account their individual financial needs and circumstances and carefully consider the risks associated with such investment decision. 

Without limiting any of the foregoing, in no event will the DOO Group or any of its affiliates be liable for any decision made or action taken in reliance on the information in this document and, in any event the DOO Group and its affiliates shall not be liable for any consequential, special, punitive, incidental, indirect or similar damages arising from, related to or connected with this document, even if notified of the possibility of such damages. 

This document contains forward-looking statements. The forward-looking statements included in this document are based on current expectations that involve a number of risks and uncertainties. These forward-looking statements are based on the analysis of DOO Group of the statistics available to it. Assumptions relating to the forward-looking statement involve judgments with respect to, among other things, future economic, competitive and market conditions all of which are difficult or impossible to predict accurately. In light of the significant uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation by the DOO Group that the forward-looking statements will be achieved. The DOO Group cautions you not to place undue reliance on its forward-looking statements and we assume no responsibility for updating any forward-looking statements. Expressions of opinion are those of the authors and are subject to change without notice. 

This document is strictly confidential to the recipient. It is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly to other person or published, in whole or in part. For any purpose, neither this document nor any copy of it may be taken or transmitted into Singapore, Hong Kong, Malaysia, United Kingdom and the United States or distributed directly or indirectly in Singapore, Hong Kong, Malaysia, United Kingdom and the United States. The distribution of this document in other jurisdictions may be restricted by law, and persons into whose possession this document should inform themselves about, and observe any such restrictions. By accepting this report, you agree to be bound by the foregoing instructions.