Quantitative tightening | 28 January 2022

#NQ100:

The U.S. tech sector has single-handedly powered Wall Street's rally in recent years, but is being battered by the dramatic repricing of bond yields and Federal Reserve interest rate expectations. “Quantitative tightening” – “QT”, or the Fed shrinking its balance sheet - is now on the 2022 agenda. That has opened up the potential for even higher bond yields, and the potential for further weakness in stocks, particularly tech. Treasury yield are breaking higher, with the two-year above 1%. With inflation the 40-year high of 7% and the Fed teasing QT, tech investors should seek shelter.

Trading recommendation: Sell 14599 and take profit 14110.

#WTI:

U.S. petroleum inventories have continued to slide over the last month and are well below their normal seasonal levels, which has helped push oil prices to their highest since 2014. The market remains chronically under-supplied with OPEC+ and U.S. shale firms unable or unwilling to meet rapidly recovering demand at prevailing price levels. Commercial inventories have declined by a total of 273 million barrels since peaking in July 2020, more than reversing the 204 million increases during the first wave of the pandemic and lockdowns. This is a positive signal for oil prices. Concern that the Federal Reserve will aggressively move to raise rates this year is taking a toll on the market. Investors have been concerned about rising rates because they raise borrowing costs and could dent global growth prospects. This is a negative signal for oil prices.

Trading recommendation: range 83.75 -86.70.

#Alcoa:

Alcoa Corporation reported fourth quarter and full year 2021 results that included the Company’s highest annual net income and earnings per share, driven by continued strength in alumina and aluminum pricing and solid operational performance. Higher alumina and aluminum prices drove a 7 percent sequential increase in revenue to $3.3 billion. On a sequential basis, the average realized third-party price of alumina increased 30 percent and the average realized third-party price of aluminum increased 8 percent. “We had a transformative year in 2021; we posted our highest ever annual net income, returned cash to our stockholders and significantly reduced our debt and pension obligations,” said Alcoa President and Chief Executive Officer Roy Harvey.

Trading recommendation: Buy 53.94 and take profit 55.50.