THE WEEK ON WALL STREET
Stocks closed out the year on a mostly positive note, adding to the year’s gains as
concerns about the economic issues of Omicron infections receded. The Dow Jones
Industrial Average rose 1.08%, while the Standard & Poor’s 500 picked up 0.85%.
The Nasdaq Composite index was flat (-0.05%) for the week. The MSCI EAFE index,
which tracks developed overseas stock markets, posted an increase of 0.80%.
The end of the year is historically a strong period for stocks–a seasonal pattern
dubbed “The Santa Claus Rally.” This year’s final week of trading did not disappoint
as stocks posted healthy gains to kick off the week, despite a global increase in
Omicron infections. Investors were buoyed by data that showed fewer associated
hospitalizations, which helped ease fears of the variant’s economic impact. The
S&P 500 set multiple fresh record highs, with Wednesday’s new high representing
the 70th such high in 2021, while the Dow Industrials recorded its first new record
since November. Stocks drifted on low trading volume in the final two trading days
of the year, capping a good week, a solid month, and a strong year for investors.
The market got off to a good start last week in part due to a strong holiday sales
report. A major credit card issuer reported that consumer holiday spending rose
8.5% from last year’s levels, driven by an 11.0% gain in online sales. It was the
biggest annual increase in 17 years. The spending by consumers exceeded pre-
pandemic sales by 10.7%. The retail categories that experienced the highest sales
increases were apparel (+47.3%) and jewelry (+32.0%).
It was a particularly robust number in view of investor concerns about supply chain
disruptions, port congestion, labor shortages, and wavering consumer confidence.
Tuesday: JOLTS (Job Openings and Turnover Survey). Institute for Supply
Management (ISM) Manufacturing Purchasing Managers’ Index (PMI).
Thursday: Jobless Claims. Factory Orders. Institute for Supply Management (ISM)
Non- Manufacturing Purchasing Managers’ Index (PMI).
Friday: Employment Situation.
Thursday: Constellation Brands, Inc. (STZ), Walgreens Boots Alliance, Inc. (WBA),
Conagra Brands (CAG).
Another year is in the books. Of course, the markets aren’t one to rest, so it’s already
time to start looking forward again. Many have called for the markets to correct.
When pushed for why, the answer is simply “inflation” or “we’re due.” As the saying
goes, bull markets don’t die of old age. Something kills them.
The most obvious bull killer would be the Fed. It has been the Fed that has largely
fueled the market since 2008 with all measure of different forms of monetary
easing. Looking forward, the talk is about monetary tightening. It may be tempting
to blame Covid or Congress or any other measures. Those certainly flavor the
cocktail. But in the end, the Fed has pulled the big levers. Assuming they tighten,
you’d expect a reaction. However, the markets are looking for this. They expect it
and the Fed has been forecasting it. Additionally, historical data suggests markets
often rise into higher rates. This would make sense based on the concept that the
economy is strengthening and therefore rates must rise. The question is, when does
the rubber band break?
HAPPY NEW YEAR!
January 03, 2022|