Markets End Lower Ahead of Fed Week, November CPI

Good evening,

The chop continues ahead of two significant events on the year-end calendar: the November CPI report releases Tuesday, Dec. 13, and the Federal Reserve’s final meeting in 2022 is Wednesday, Dec. 14. An expected rate decision should dictate how markets end the turbulent year. Will we see a Santa Claus rally once again?

The S&P 500 fell -1.4% on Tuesday, its 59th decline of 1% or more this year. Since 1950, the only years with more +1% declines than 2022: 1974, 2002, 2008. This fraught environment was the focus of our weekly huddle Thursday morning in New York. Here are the key takeaways:

Favor energy, cautious about Technology. Mark Newton, our Head of Technical Strategy, returned from a week of client meetings in Japan with our Head of Research, Tom Lee. While he was away, the market mostly fell, which Newton characterized as a “bit concerning” because we broke a minor uptrend from the October low. Volume and breadth have pulled back, setting up for what could be a choppy final three weeks of the year. Energy, which has been the top sector for the past two years, was one of Newton’s top picks entering 2022. (Our other research heads have generally been in agreement on this.) He remains constructive in the area even as crude prices have fallen. ...