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Volatility has skyrocketed from about 17 to 38 currently, a level last seen in January 2021. Risk assets have sold off from stocks to crypto, all styles included, at a rapid pace, accelerating in the last few days, making it difficult for traders taken on the wrong side of the trade to readjust positions quickly enough. At the heart of the market anxiety, investors are fearing a Fed tightening and disappointing earnings could cause more selling. However, earnings are resilient so far, and the market has discounted a lot of the Fed tightening well ahead before it has even began. With the Fed on Wednesday and several earnings release this week, the market may find some support, in what remains an extremely volatile environment rarely seen during the post-Covid era. 

As US stocks just start showing sign of weakness, some major Asian indices are in fact almost close to entering a bear market. Asian stocks and emerging economies broadly speaking are the most vulnerable to policy tightening in the US and a stronger US dollar, and since the Fed hawkish tone, they have failed to attract investors attention. However, some believe that the fed starting an interest rate hiking cycle could already be partly priced in, and with recent announcement from the Chinese government to support the economy, Asian stocks could see a U-turn. 

Tech-heavy benchmark, the Nasdaq Index made its worst start of the year since 2008, down around 11% year to date. Negative sentiment, and a great deal of apprehension as the Fed plans to begin withdrawing its record stimulus, is partly to blame, but also significant uncertainty around earnings season and rising costs is causing buyers to stay on the sidelines. On a technical level, traders will be watching for the index to hold the October 2021 lows, about 2% lower from current levels. Markets could find some relief next week in the Wednesday FOMC, and continuation of earnings of the US tech giants.

Equities bounce as US Initial Jobless Claims rise to 286'000, the most since October 2021. Today's data suggest that Omicron, tight supply chains, and rising prices are likely weighing on economic activity. The rebound in US stocks highlights greater optimism among investors on the believe that maybe the Fed will not remove accommodation as early and aggressively as the markets are pricing in. 

The Russell 2000 has dropped back to February 2021 lows, as investors seek to shed exposure to companies that are not yet profitable. Upon increasing uncertainty, and rising borrowing costs, investors are rotating companies with high valuations, in favor of large-cap companies with significant cash-flows, high dividends, and lower valuation multiples. Those companies with high pricing power and resilience in an inflationary environment are showing the most interest from market participants.