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?
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HAPPY NEW YEAR!
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January 03, 2022
