Week of December 6, 2021

A wild week of market volatility ended with a mixed session last Friday, with the Dow, S&P 500 and NASDAQ having lost ground over several concerns.  The Dow dropped more than 905 points a week ago Friday, only to have declines of 652 and 461 last Tuesday and Wednesday.  Only last Monday and Thursday saw gains of 236 and 617, respectively.

The U.S. equity markets have been rattled on conflicting signals from scientists and vaccine makers regarding the severity of the Omicron variant and how the vaccines may work against it.  It may be weeks before a more definitive picture can be seen.  But recent reports, especially those coming directly from South Africa, seem to indicate that while the new variant is highly transmissible its affects have been considered mild to moderate.  “It seems like this is not going to lead to the worst-case scenario.  I wonder if we’re being complacent, but the early indications suggest we’re not,” said Fahad Kamal, chief investment officer at Kleinwort Hambros.

Last week, Fed Chair Jerome Powell also hook the markets by signaling the Fed’s focus was inflation, even with the new variant emerging.  Comments by Fed officials suggest that the Fed is likely to decide to double the pace of its taper program (the reduction of Fed purchases of bonds in the open market) by $30 billion a month at its meeting next week, CNBC’s Steve Liesman reported.  Initial discussions could begin as soon as the December meeting about when to raise interest rates and by how much next year.

Slower-than-expected job growth also contributed to last Friday’s selling.  Nonfarm payrolls increased by 210,000 last month, the Labor Department reported last Friday, which was far below the 573,000 number economists surveyed by Dow Jones were expecting.