THE WEEK ON WALL STREET
Stocks took investors on a wild ride last week as the Omicron variant and Fed
comments upended market expectations. The Dow Jones Industrial Average fell
0.91%, while the Standard & Poor’s 500 stumbled 1.22%. The Nasdaq Composite
index dropped 2.62% for the week. The MSCI EAFE index, which tracks developed
overseas stock markets, lost 0.62%.
A TUMULTUOUS WEEK
Stock prices were volatile all week, swinging wildly after staging a modest recovery
to begin the week. Omicron fears were not the only issue weighing on investors.
Markets were also rattled by Fed Chair Powell’s Congressional testimony stating
conditions warranted considering an acceleration of its bond purchase taper
schedule. Last week’s roller-coaster action was epitomized on Wednesday when
stocks rallied intraday by 520 points on the Dow Industrials, only to close the
session lower by 460 points. Stocks staged a powerful rebound on Thursday on
news that a second Omicron infection exhibited mild symptoms. Also helping the
rebound was news that an agreement was reached in the House of Representatives
to temporarily fund the government and word from President Biden that an
economic lockdown was not in the plan to fight COVID this winter. Emblematic of
the volatile week, stocks fell on Friday following a weak jobs report.
POWELL SURPRISES MARKETS
Markets easily digested the Fed’s early-November announcement that it would pull
the trigger on its bond purchase tapering program, but were caught off-guard by
Powell’s comments during Congressional testimony last Tuesday. Powell indicated
that the Fed would discuss the option of accelerating its tapering plans at its next
meeting. Powell cited the risk of higher inflation and substantial improvement in
the labor market as warranting ending bond purchases a few months sooner than
planned. Powell sought to move away from describing inflation as transitory,
acknowledging that rising energy prices, higher rents, and strong wage gains could
keep inflation elevated, though he maintained inflation would decline sometime in
2022.
THE WEEK AHEAD: KEY ECONOMIC DATA
Wednesday: JOLTS (Job Openings and Labor Turnover Survey).
Thursday: Jobless Claims.
Friday: CPI (Consumer Price Index). Consumer Sentiment.
THE WEEK AHEAD: NOTABLE COMPANIES REPORTING EARNINGS
Monday: Coupa Software (COUP), MongoDB (MDB).
Tuesday: AutoZone, Inc. (AZO).
Wednesday: Gamestop Corp. (GME), UiPath, Inc. (PATH).
Thursday: lululemon athletica, inc. (LULU), Broadcom, Inc. (AVGO), Costco
Wholesale Corporation (COST), Chewy (CHWY).
FINAL THOUGHTS
The markets moved in yo-yo like fashion last week as Omicron news along with
testimony by Federal Reserve Chairman Jay Powell gave impatient investors fuel to
panic sell. The market fell about 5% from all-time highs and as of this writing is
rebounding nicely today. Undoubtedly there will be a bit more volatility as we close
out the year. However, most analysts are still looking for a Santa Claus rally into
year-end for the markets. The most likely scenario is Omicron isn’t as bad as the
media was hoping and the Fed continues to taper bond buying which should be well
priced into the markets at this time. Meanwhile consumers have a voracious
appetite as the stores are jammed and package delivery personnel are working in
high gear. I suspect this will be one of the best retail sales (both in store and online
combined) seasons we’ve ever seen.
Have a good week!
