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Markets End Volatile Week Lower Amid Heightened Concerns

Market Data as of Week Ending: 12/17/2021 unless noted otherwise

Equities

U.S. stock prices ended the volatile trading week lower as the prospect of central bank tightening and uncertainty regarding the impact of omicron spread plagued sentiment. The S&P 500 fell by -1.91%, after rallying last week, amidst tech weakness. The value factor was a positive contributor as those stocks outperformed growth last week while the size factor was mixed. Traditionally defensive sectors such as health care, utilities, consumer staples outperformed, while sensitive sectors in energy and technology lagged. Developed foreign and Emerging Market stocks ended the week lower, but outperformed U.S. stocks.

Bonds

U.S. Treasury yields were mixed as short-term yields remained flat, reflecting monetary policy, while longer dated maturities dipped. The 10-year fell to 1.40%, down from 1.49% at the end of the previous week. Investment grade corporates and high yield bonds decreased slightly, ending the week with yields around 2.3% and 5.0%, respectively.

Macroeconomic Data

Economic data released during the week was headlined by the Federal Reserve monetary policy meeting. As expected, the Fed announced it’s accelerating the pace at which it will phase out its pandemic-era program that’s been purchasing $120 billion in bonds each month. The Fed taper is now expected to end by March 2022 instead of next June. The NFIB small-business index rose slightly to 98.4, as 59% of small-businesses increased prices over the last month. U.S. retail sales slowed in November as consumers bought fewer goods and services amid higher prices. The Philly fed manufacturing index slipped to 15.4 in December, well off the estimated reading of 30.0. The home builder’s monthly confidence index rose to 84 in December, reflecting the positive outlook considering the continued low supply of existing homes for sale. The BoE unexpectedly raised its bank rate 15 basis points to 0.25% as a first step to control inflation. Data released before the meeting indicated that 12-month consumer price inflation hit 5.1% in November—the highest level in a decade.

 

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