The recent decline in U.S stocks , particularly against the backdrop of surging Covid cases, has left many investors unnerved. Tuesday (Jan. 18), the Dow Jones Industrial Average was down more than 540 points, a number that is sure to capture the attention of anyone who watches the markets.
Veterans of equity investing know that one can always find reasons to worry about market levels.
If there was a message in the first day of trading last week, it was that the market is not too concerned about the rising omicron numbers. The New Year began with a new high for both the Dow Jones Industrial Average (DJIA) and the S&P 500 Index (SPX). The new highs were not much beyond the old highs, but new records nevertheless.
High-profile economic reports this week include a last look at 2021 inflation. December CPI and PPI will be released Wednesday and Thursday, respectively, and are expected to post the highest readings of this cycle and in the case of CPI, the highest since the early 1980s. CPI is expected at 7% and PPI (final demand) at 9.8%. In addition,
The new year starts with a busy calendar. Top-tier economic releases this week include The ISM manufacturing survey for December, released on Tuesday and the employment report released on Friday. The jobs report is forecasting 400,000 new jobs and an unemployment rate of 4.1%, the lowest since pre-pandemic. Both reports are expected to reflect that the economy closed the year on solid footing.
The so-called Santa Claus Rally is a seasonal pattern that has seen the stock market make gains the last week of the year and the first two trading days of the new year. Stocks have averaged a 1.4% gain over this time frame since 1969, with 75% of the years posting positive returns. This year the Santa Claus Rally will run headlong into concerns over the new Omicron variant of the COVID-19 virus,
By Ben Norris, CFA, Securities Research Analyst, Associate Vice President
Two weeks ago, I wondered whether the emerging omicron variant would have any effect on the Federal Reserve’s monetary policy plans. Similarly, investors have spent the last few months wondering whether the Federal Open Market Committee (FOMC) would make the rumors come true and accelerate the tapering of stimulative bond purchases. We got answers last week as Chairman Jerome Powell and the rest of the FOMC accelerated the pace of tapering to now conclude sometime in spring 2022 (the expectation was summer 2022 prior).
This will be a shortened trading week. Friday is a holiday since Christmas falls on Saturday. Typically, Christmas Eve is a half day of trading for stocks. Trading is expected to be quiet.
Economic reports out this week include readings on housing (new and existing home sales), consumer confidence (Consumer Confidence from the Conference Board and University of Michigan Consumer Sentiment) and inflation (personal consumption expenditures deflator).
The Federal Open Market Committee meeting on Wednesday sits front and center this week. Fed Chairman Jerome Powell has already indicated that the Fed might accelerate its pace of tapering and the markets are pricing Fed rate increases in the first of calendar year 2022. Traders will listen closely to the Fed’s latest thoughts on the pandemic, inflation and the future path of monetary policy.
Following a couple very lean weeks, the market woke up and chowed down last week. On Monday and Tuesday, the averages gobbled up points voraciously. The lessening of the Omicron variant as a threat spurred the market’s appetite; Monday was the best day for the Dow Jones Industrial Average (DJIA) in nine months. By midmorning Tuesday, DJIA had recovered all of its post-Thanksgiving Day loss.