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December 13, 2021 - Market Insights

December 14, 2021
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A more benign reassessment of the possible economic risk posed by Omicron sent stocks sharply higher last week.

The Dow Jones Industrial Average picked up 4.02%, while the Standard & Poor’s 500 advanced 3.82%. The Nasdaq Composite index gained 3.61% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, rose 2.74%.1,2,3

Assessing Omicron

Though much is still unknown about the Omicron variant, reports of potentially milder health effects and the efficacy of booster shots ignited optimism that its economic impact would be less severe than originally feared.

Stocks rallied higher each of the first three days, with strong gains in many of the reopening stocks, such as airlines, travel and leisure, financials, and energy. The performance of high-valuation growth companies was a bit more erratic as they rose and fell sharply throughout much of the week. Weakening Thursday, stocks turned higher on Friday despite a hot inflation number, pushing the S&P 500 to a new record high.4

Inflation Factor

November’s Consumer Price Index (CPI) came in at a nearly 40-year high, rising 0.8% from the previous month and 6.8% from a year ago. It is the 6th-consecutive month that inflation has exceeded 5%. Core inflation (excluding the more volatile food and energy prices) came in lower, but still posted its sharpest jump since 1991.5

Economists have attributed this elevated inflation rate to strong consumer demand, a shortage of goods due to supply chain constraints, and strong wage growth. How long this high level of inflation persists is unknown, but the Fed has begun considering policy steps to manage it.

This Week: Key Economic Data

Wednesday: Retail Sales. FOMC (Federal Open Market Committee) Announcement.

Thursday: Jobless Claims. Housing Starts. Industrial Production. PMI (Purchasing Managers’ Index) Composite Flash.

Source: Econoday, December 10, 2021
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.

Footnotes and Sources

1. The Wall Street Journal, December 10, 2021
2. The Wall Street Journal, December 10, 2021
3. The Wall Street Journal, December 10, 2021
4. CNBC, December 10, 2021
5. The Wall Street Journal, December 10, 2021