A Mild Santa Clause Rally
Weekly Market Commentary - 12/31/2021
Financial market action in the final week of the year was relatively muted. A mild Santa Clause rally did ensue as seasonal factors such as rebalancing and window dressing kicked in. Investors got a full dose of coronavirus news as the Omicron variant continued to spread rapidly. The CDC announced that asymptomatic people could reduce isolation time to 5 days from 10 days and is also expected to include the cohort of 14-15-year-olds for eligibility to receive a booster shot. Still, many flights were canceled due to the virus, and New Year’s festivities were curtailed, giving some pause to the reopening trade.
The S&P 500 gained 0.9% for the week and closed the year 26.9% higher. The Dow added 1.1%, the NASDAQ declined by 0.1%, and the Russell 2000 rose by 0.2%. Trading in the US Treasury market was quiet, the yield on the 2-year note increased four basis points to 0.73%, and the 10-year yield increased by two basis points to 1.51%. Oil prices increased by $1.53 or ~2%, with WTI closing at $75.15 a barrel. EIA oil inventories showed a larger draw than expected at 3.58 million barrels. Gold prices increased by $16.2 to close at $1828.10 an Oz. Copper prices increased by 1.5% or $.0694 to $4.463 a Lb. Bitcoin tumbled 8% on the week and closed the year at $47,052.
Economic data was positively skewed for the week. In the labor market, Initial Claims and Continuing Claims trended lower to 198K and 1.716m, respectively. The S&P Case-Shiller index increased 18.4% in October, while Pending Home Sales decreased 2.2% in November. Finally, the Chicago PMI rose to 63.1, better than the consensus estimate of 61.5.