Market Data as of Week Ending: 12/03/2021 unless noted otherwise
U.S. stock prices pulled back last week on news of the Federal Reserve’s potentially accelerated tapering program along with growing concerns that the Omicron variant could weigh on global economic growth and contribute to supply chain disruptions. Last week’s trends remained in place as the value factor was once again a positive contributor as those stocks outperformed their growth counterparts and large companies significantly outperformed their small and mid-sized peers. Utilities and real estate were the only sectors to post a gain last week. Consumer staples, information technology and industrials outperformed, while the communication services and consumer discretionary sectors gave up the most ground. Developed foreign stocks in Europe and Asia outperformed U.S. stocks and Emerging Market stocks outpaced both U.S. and developed foreign stocks.
U.S. Treasury yields were mixed, as the yield curve flattened over the week as Fed Chairman Powell’s hawkish testimony sent short-maturity yields higher while uncertainty around the Omicron variant’s impact on growth sent 10-year lower, ending the week at 1.35%. Investment grade corporates remained anchored while high yield corporate bonds declined, ending the week with yields at 2.3% and 5.1%, respectively.
Economic data released during the week was relatively mixed, highlighted by jobs report. The U.S. only gained 210,000 new jobs in November, well below the expected 573,000, even though businesses ramped up hiring efforts. However, the unemployment rate fell sharply, from 4.6% to 4.2%, and the labor participation rate rose as more Americans entered the labor force. U.S. consumer confidence fell to a nine-month low in November due to inflation concerns, while optimism is expected to take another hit as the Omicron variant enters the picture. The ISM manufacturing index rose to 61.1% in November, suggesting strong factory activity and potentially supply chain easing. The ISM services index jumped to 69.1% in November, as service-oriented businesses such as banks, retailers and drug stores grew at their fastest pace on record, despite companies dealing with labor and supply shortages. Inflation in the eurozone accelerated to its highest level since the single currency was introduced in 1999. Consumer prices rose an annualized rate of 4.9% in November, up from 4.1% in October, as energy costs surged.