Analytics, 11 December 2021
Week 49 in Brief
North America
U.S. stock closed higher Friday and gained for the week, with the S&P 500 index closing at a fresh peak, as investors digested data that showed consumer prices in November rose by the most in nearly four decades ahead of the Federal Reserve’s monetary policy meeting next week.
How did the major indices perform?
- The Dow Jones Industrial Average advanced 216.3 points, or 0.6%, to close at 35,970.99.
- The S&P 500 climbed 44.57 points, or 1%, to end at a record 4,712.02.
- The Nasdaq Composite rose 113.23 points, or 0.7%, to finish at 15,630.60.
- For the week, the Dow gained 4%, the S&P 500 climbed 3.8% and the Nasdaq advanced 3.6%. The Dow saw its biggest weekly percentage gain since March, snapping a four-week losing streak, according to Dow Jones Market Data. The S&P 500 and Nasdaq each had their largest weekly percentage gain since February.
What drove the US market?
- Inflation Data: Inflation soared 6.8% year-over-year in November to the highest rate since 1982, the Labor Department said Friday. The print came in slightly higher than the 6.7% Dow Jones estimate. The consumer price index, which measures the cost of a wide-ranging basket of goods, rose 0.8% for the month. The Core CPI, which excludes food and energy prices, rose 0.5% for the month and 4.9% from a year ago, in line with estimates. Some investors may have been anticipating an even hotter inflation reading than economists, leading to a relief rally following the number.
- Consumer Reading: Consumer sentiment measured by the University of Michigan’s gauge rebounded in December to 70.4 from a final November reading of 67.4. Economists polled by The Wall Street Journal expected an index reading of 68.0. The reading appears muted relative to pre-pandemic levels, which suggests consumers decreasing confidence amongst consumers.
- Monetary Policy: The consumer inflation report sets the stage for the Federal Reserve’s policy meeting next week after Fed Chair Jerome Powell recently telegraphed the central bank’s plans to consider tapering its monthly bond purchases at a faster pace. Analysts believe the high inflation reading increases the probability that the Fed will announce an accelerated tapering at its December meeting, which markets are already expecting.
Which US stocks were in focus Friday?
- Consumer staples and information technology saw the strongest gains Friday among the S&P 500 index’s sectors, each closing around 2% higher.
- Shares of Oracle Corp. soared 15.6% after the database giant reported forecast-beating fiscal second-quarter results.
- Broadcom shares rose 8.3% after the chip and software company announced an aggressive plan to return shareholder cash following an earnings beat.
- Chewy stock slid about 8.1% after the online retailer of pet food and other pet-related products reported fiscal third-quarter results late Thursday.
- Peloton Interactive Inc. shares dropped 5.4% after the maker of home-exercise equipment was cut to neutral from outperform at Credit Suisse, which slashed its price target to $50 from $112. Credit Suisse cut its view on the company, saying a return to gyms and shifts in consumer spending will weigh on profitability. Shares also slid 11% on Thursday, amid publicity over a plot twist in the “Sex and the City” revival.
How did the European markets perform?
- European markets closed slightly lower on Friday as renewed concerns about the omicron Covid-19 variant continue to weigh, while investors reacted to key U.S. inflation data.
- The pan-European Stoxx 600 provisionally ended 0.3% lower, with most sectors and major bourses in negative territory. Technology and retail were the top decliners in Europe on Friday.
- Auto stocks were led higher by Daimler AG which rose 2.9% after spun-off Daimler Truck climbed in its market debut on the Frankfurt Stock Exchange. Gains for the sector came even as data showed China’s auto sales dropped 9.1% in November, marking their seventh consecutive monthly fall, as a prolonged global shortage of semiconductors disrupted production.
- In economic data, the U.K. economy grew just 0.1% month-on-month in October, shy of expectations in a Reuters poll for a 0.4% expansion. The reading has fueled doubts over whether the Bank of England will hike interest rates at its next meeting.
- Meanwhile, news that the European Central Bank is widely considering a temporary increase to its bond purchase plan at a policy meeting next week was seen as a dovish step.
- Tobacco group Swedish Match jumped 7.2% after the Wall Street Journal reported that U.S. Democrats dropped a proposed vaping tax that would have taxed e-cigarettes like regular ones.
- Food delivery companies Deliveroo and Just Eat Takeaway slipped 2.4% and 3.2% respectively, adding to losses in the past week on worries that a European Commission ruling on gig economy drivers would hurt profits.
How did Asian markets perform?
- Asian markets finished broadly lower today with shares in Hong Kong leading the region. The Shanghai Composite Index closed 0.2% lower but booked a weekly gain of 1.6%, while the Hang Seng Index fell about 1.1% in Hong Kong but remained up 1% for the week. China’s CSI 300 fell 0.5% but boasted a 3.1% weekly rally. Japan’s Nikkei 225 Index closed down 1% but notched a 1.5% gain over the five days.
- Southeast Asian unicorn Grab had a rough first day on Wall Street. The Singaporean startup closed down nearly 21% Thursday as it began trading on New York’s Nasdaq. Grab went public by merging with a special-purpose acquisition company, or SPAC. The deal — in which Grab raised $4.5 billion and was valued at nearly $40 billion — was the biggest of its kind on record; it’s also the largest US market debut by a Southeast Asian company.
Commodities and Bonds
- The yield on the 10-year Treasury note was little changed at 1.487% Friday but rose about 14.5 basis points for the week.
- Oil prices rose in their biggest weekly gain since late August. Brent crude rose 73 cents to settle at $75.15 a barrel. U.S. crude settled up 73 cents at $71.67 a barrel.
- Gold futures rose 0.5% to settle at $1,784.80 an ounce, slightly above the most-active contract’s finish a week ago.
Currencies
- The ICE U.S. Dollar Index, a measure of the currency against a half-dozen other monetary units, fell 0.2% Friday and was down about 0.1% for the week.
- The euro was up 0.19% to $1.1314. The Japanese yen strengthened 0.02% versus the greenback at 113.43 per dollar.
- Bitcoin rose 1.51% to $48,301.91.
Next Week
Investors will monitor comments from the two-day FOMC meeting, including whether tight labor market conditions and rising inflation will spur the Fed to accelerate tapering its monthly bond-purchasing program.