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Rate Hikes, Lululemon Outlook, Gaming Deal: 3 Things to Watch

Stock MarketsJan 10, 2022 03:57PM ET
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© Reuters.

By Sam Boughedda

Investing.com -- Stocks clawed back some of their losses on Monday after opening sharply lower on concerns about rising interest rates, which weighed on the growth-oriented tech sector.

Heading into the close, the S&P 500 and NASDAQ Composite were on track for a fifth-straight day of declines, though the Nasdaq turned positive in the last minute.

Growth stocks sold off during the start to the new year as investors braced for the Federal Reserve to begin pulling back its stimulus, which has kept wind the sales of the sector for the duration of the pandemic.

In a note, analysts at Goldman Sachs (NYSE:GS) forecast four rate hikes by the Fed this year – one more than people expected..

Speaking of the Fed, Chair Jerome Powell heads to the Senate on Tuesday to testify as the chamber takes up his nomination for a second term at the head of the central bank.

Reuters reported that traders have raised their rate hike expectations this year after the U.S. central bank's minutes from the December meeting. Markets are now expecting a greater than 70% chance of an interest rate rise to 0.25% in March, the news agency reported.

Inflation data later this week could cement the Fed’s decision.

Here are three things that could affect markets tomorrow:

1. Rate hikes

Goldman analysts weren’t the only ones talking about the trajectory of Fed hikes this year. JPMorgan Chase (NYSE:JPM) CEO Jamie Dimon said on Monday the economy is generating so much inflation that the Federal Reserve might have to raise short-term interest rates more than four times this year, according to Reuters.

Speaking to CNBC, Dimon said, "It's possible that inflation is worse than people think. I, personally, would be surprised if it's just four increases this year. Four would be very easy for the economy to absorb."

2. Tempering expectations

It was one of the beneficiaries of the pandemic, but now the pandemic is coming back to bite. On Monday, Lululemon Athletica Inc (NASDAQ:LULU)shares fell 5% after it told investors that the Omicron variant has affected the business, and it now expects earnings and revenue to be at the lower end of their respective ranges.

The athletic apparel company said it "started the holiday season in a strong position but have since experienced several consequences of the Omicron variant, including increased capacity constraints, more limited staff availability, and reduced operating hours in certain locations."

As a result, it now expects revenue to be toward the low end of its range of $2.125 billion to $2.165 billion for the fourth quarter. It also forecasts earnings per share for the period toward the low end of its $3.25 to $3.32 range.

3. Big gaming deal

Zynga Inc (NASDAQ:ZNGA) stock soared after Take-Two Interactive Software Inc (NASDAQ:TTWO)said it had a deal to acquire the mobile game maker for $12.7 billion, or $9.861 per share.

Shareholders of Zynga — the maker of "FarmVille" and "Words With Friends" — will receive $3.50 in cash and $6.361 in shares of Take-Two stock for each share of Zynga they own.

Take-Two, the parent company of "Grand Theft Auto" maker Rockstar Games, said the deal will establish them as one of the largest publishers of mobile games, "the fastest-growing segment of the interactive entertainment industry."

–Investing.com staff and Reuters contributed to this report

 

 

Rate Hikes, Lululemon Outlook, Gaming Deal: 3 Things to Watch
 

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