Historic low jobless claims, good omicron news, and the specter of the Fed looms (December 10 Market Recap)
December 10 Market Recap – a historically low jobless claims number and positive, if early, data on omicron sent markets soaring this week despite hot inflation numbers and the specter of the Fed announcing a more rapid tightening of the money supply next week.
Dow 35,970 or +1,389 or 4.0%
Nasdaq 15,630 or +545 or 3.6%
S&P 4,712 or +174 or 3.8%
U.S. 10 Year Treasury Yield 1.488%, +12.1 bp or 8.8%
An Almost Perfect Week of News
The economic news throughout the week was gangbusters. The labor market continued to tighten as a near record number of job openings were reported, job quits while still high, fell compared with last month’s numbers, and new jobless claims fell to a 52-year low (more evidence that last week’s non-farm payrolls report will be revised sharply higher next month). December preliminary consumer sentiment was also quite strong. In addition to the economic data, there were multiple positive data points regarding omicron. Dr. Fauci, while warning that the data is very preliminary at this stage, noted that omicron seems to be causing less serious illnesses than the Delta variant. Further, both GlaxoSmithKline and Pfizer/BioNTech said that their Covid treatments are effective against omicron (GSK’s monoclonal antibody treatment and PFE/BNTX’s vaccine).
The only downside to the week was the fact that the good news as well as the hot inflation data that came out on Friday has backed the Federal Reserve policymakers into a corner. Referring to the pricing pressures as “transitory” until last week and slow in tightening the money supply, the data from this week almost assures that the Fed will double the tapering of their asset purchases from $15 billion a month to $30 billion when Fed Chairman Powell briefs the media on Wednesday. Market observers will be parsing every word of the Chair’s statement in an attempt to glean any clues as to when the first rate hike of 2022 might occur.
Market Data Points Next Week
- Monday – N/A
- Tuesday – Producer Price Index (PPI)
- Wednesday – Retail Sales, Empire State Manufacturing. Federal Reserve FOMC and Fed Chair Jerome Powell comments on tapering and possible 2022 rate hikes.
- Thursday – Initial Jobless Claims, Markit Manufacturing and Services PMI.
- Friday – N/A
December 10 Market Recap Trading…
Monday– Dow +646 to 35,227, Nasdaq +139 to 15,225, S&P +53 to 4,591.
- Markets moved higher on Dr. Fauci’s hopeful comments regarding Omicron. While noting that data is scarce and that it is very early in the process, the doctor noted that it appears that while the variant seems to be affecting younger people more than previous variants, the severity of illnesses omicron causes seems to be less than that of Delta.
- 20 Cases of Omicron have been reported in the U.S. thus far.
- All eleven S&P sectors traded higher today on the Fauci comments. Industrials, Consumer Staples and Utilities led the charge.
- The 10-year U.S. Treasury yield gained 7 bp to 1.437.
Tuesday – Dow +492 to 35,719, Nasdaq +461 to 15,686, S&P +95 to 4,686.
- The Chinese Central bank eased monetary policy and British drugmaker GlaxoSmithKline said its monoclonal antibodies treatment was effective against all strains of the omicron variant, both of which helped send shares soaring today.
- The market continued its rally today despite whispers that the Fed will now double the pace of its tapering program to $30 billion a month beginning at the Fed meeting next week.
- All eleven S&P sectors traded up today. Tech, Consumer Discretionary, and Energy were the best performing sectors.
- The 10-year U.S. Treasury yield traded up 4 bp to 1.473%.
Wednesday – Dow +35 to 35,754 Nasdaq +100 to 15,786, S&P +14 to 4,701.
- Pfizer and BioNTech said that three doses of their vaccine are effective against the omicron Covid variant.
- Eight of eleven S&P sectors traded higher with Communication Services, Healthcare and Real Estate leading the markets.
- The October JOLTS (Job Openings and Labor Turnover Survey) reported job openings at a near record 11.03 million jobs and quits were down 4.7% to 4.16 million resignations.
- The 10-year U.S. Treasury yield traded up 4 bp to 1.517%.
Thursday – Dow +0 to 35,754, Nasdaq (269) to 15,517, S&P (33) to 4,667.
- A historic weekly jobless claims print sent the markets tumbling, especially growth stocks, on the assumption that a strong labor market combined with tomorrow’s anticipated inflation numbers will push the Fed to tighten money supply more quickly than expected.
- Only two of the eleven S&P sectors traded positively today, Health Care and Consumer Staples. Consumer Discretionary, Real Estate and Technology traded the poorest.
- Initial Jobless Claims printed a 52-year low @ 184,000 vs expectations of 215,000. Last week’s number was revised slightly higher to 227,000 claims, 5,000 more than previously reported.
- The 10-year U.S. Treasury yield traded down 2 bp to 1.491%.
Friday – Dow +216 to 35,970, Nasdaq +113 to 15,630, S&P +44 to 4,712 (record close).
- As expected, inflation numbers came in hot again. The Consumer Price Index (CPI) was +6.8% year over year vs +6.7% expected, monthly CPI +0.8% vs +0.7% expected and Core CPI (ex food and energy) was up +0.5% vs October, and +4.9% year over year, both in line with expectations.
- Preliminary December University of Michigan Consumer Sentiment was better than expected at 70.4 vs 68.
- All eleven S&P sectors traded positively today led by Tech, Consumer Staples, and Energy.
- The 10-year U.S. Treasury yield traded down slightly to 1.488%
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