Week 48 in Brief
U.S. stocks ended lower on Friday, relinquishing gains, and recording another week of losses, driven by a weaker-than-expected November jobs report, and the possibility of the Federal Reserve tamping down inflation earlier than thought, and the expected impacts of the Omicron variant of the coronavirus.
How did the major indices perform?
- The Dow Jones Industrial Average fell 59.71 points, or 0.2%, to close at 34,580.08, after hitting 34,801.31 near the open.
- The S&P 500 index slipped 38.67 points, or 0.8%, to end at 4,538.43, after setting an intraday peak at 4,608.03.
- The Nasdaq Composite slipped 295.85 points, or 1.9%, to finish at 15,085.47, near the 100-day moving average at 15,082.44, according to FactSet.
- Earlier in the week on Thursday, the Dow industrials rose 617.75 points, or 1.8%, to 34,639.79 — the best percentage gain since March 5, 2021, and the best point gain since Nov. 9, 2020; The S&P 500 index closed up 1.4% to 4,577.10, its best day since Oct. 14; while the Nasdaq Composite added 0.8% to 15,381.32. Meanwhile, small-cap oriented Russell 2000 index gained 2.7% Thursday to finish at 2,206.33, a day after hitting its first correction since June 2020.
- For the week, all three major indexes booked losses, with the Dow falling 0.9%, the S&P 500 sliding 1.2% and the Nasdaq dropping 2.6%. The Russell 2000 index saw a weekly decline of 3.9%.
What drove the US market?
- Weak Employment Data: Markets ended lower as a report from the Labor Department showed that the U.S created just 210,000 new jobs in November, well below estimates from economists’ expectations of 573,000 new jobs. However, there were enough perceived positives in the numbers that it reignited concerns of an aggressive pace of tightening of financial conditions by the Federal Reserve as the unemployment rate plunged to a 21-month low of 4.2%
- Federal Reserve Policy: Fed Chair Jerome Powell’s remarked Tuesday about potentially speeding up the central bank’s tapering process amid high inflation, along with uncertainty surrounding the impact of the new omicron variant of the coronavirus, have been the main source of uneasiness in the market this week. Investors are scrutinizing the jobs report because if the Fed deems it a positive, the central bank could speed up interest-rate hikes and deliver a hit to rate-sensitive, growth-oriented stocks in the technology sector.
- Concerns on the valuation of technology stocks: The market remains concerned that tech valuations were too lofty, which, perhaps, are highlighted by the precipitous decline in shares of DocuSign DOCU, down 42.2% Friday after the electronic-signature company billings and revenue forecast missed expectations and its chief executive said the pandemic boom had worn off in the quarter.
- Economic Data: In other economic reports Friday, the final November reading of IHS Markit’s purchasing managers index geared to the service sector was 58 versus an initial reading of 57. The more closely watched services reading from the Institute for Supply Management rose to 69.1 in November from 66.7, above forecasts. A reading of 50 or better indicates improving conditions. U.S. factory orders were up by 1% in October.
Which US stocks were in focus Friday?
- The U.S. listed shares of Chinese companies fell into focus on Friday, after Chinese ride-hailing giant Didi Global said late Thursday it will delist from the New York Stock Exchange, following pressure from the Chinese government. Shares of Didi plunged 22.2% Friday, closing at $6.07.
- Shares of Marvell Technology surged 17.7% after the chip maker’s results and outlook topped Wall Street forecasts. Marvel shares closed at $83.59.
- In addition to concerns over the impact of coronavirus on transportation, airlines stocks fell after the leaders of the U.S. House Transportation Committee launched Congressional scrutiny of U.S. airline assistance. The Committee asked a major airline industry trade group to answer questions about $54 billion in government payroll aid carriers got.
How did the European markets perform?
- European shares fell on Friday, hitting session lows after a downturn in U.S. stocks on a tech slide and fears around the Omicron coronavirus variant hitting economic recovery.
- The pan-European STOXX 600 (.STOXX) erased morning gains to close down 0.6% after swinging between losses and gains all week on worries over the potential impact of the newly detected variant, and the U.S. Federal Reserve’s recent hawkish turn.
- Economic data showed inflation in Europe surged, with Germany’s hitting highest in decades. But the European Central bank has maintained its ‘transitory’ inflation stance. The ECB may set policy for a relatively short period at this month’s meeting given heightened uncertainty, President Christine Lagarde told Reuters.
- Meanwhile, IHS Markit’s survey showed eurozone business activity accelerated last month, but the bounce may be temporary as demand growth weakened and fears about the Omicron variant put a dent in optimism.
- Among individual stocks, Dassault Aviation surged 6.5% to the top of the STOXX 600 after France sealed a deal for 80 Rafale warplanes with the United Arab Emirates - the largest order ever for the warplane; Gaming company Evolution AB rose 6.5% on a share buyback; while Swedish Orphan Biovitrum (Sobi) plunged 24% after U.S. private equity firm Advent International and Singapore’s sovereign wealth fund said they were withdrawing their bid for the drugmaker.
How did Asian markets perform?
- Shares in Asia-Pacific closed mostly higher on Friday, though the Hong Kong market was weighed down by tech after ride-hailing giant Didi announced Friday that it will begin taking steps to delist from the New York Stock Exchange — less than six months after it made its debut stateside. Didi shares fell 22.17%, losing about $8.4 billion in market value. At their Friday close of $6.07, Didi shares have fallen about 57% since their June 30 IPO price.
- The Shanghai Composite Index closed 0.9% higher Friday for a weekly gain of 1.2%, while the Hang Seng Index closed 0.1% lower in Hong Kong, bringing its decline for the week to 1.3%. Japan’s Nikkei 225 Index closed 1% higher Friday but still slid 2.5% for the week.
Commodities and Bonds
- The yield on the 10-year Treasury note fell Friday more than 10 basis points to 1.342%. The yield fell 14.2 basis points this week for its largest weekly decline since June 2020, as investors anticipated slower economic growth next year. In oil futures, West Texas Intermediate crude for January delivery fell 0.4% Friday to settle at $66.26 a barrel, notching a sixth straight week of declines.
- Meanwhile, Gold futures for February delivery rose 1.2% to settle at $1,783.90 an ounce. For the week, gold prices based on the most-active contract traded nearly 0.1% lower, according to Dow Jones Market Data.
- The ICE U.S. Dollar Index, a measure of the currency against a half-dozen other monetary units, was little changed as the dollar reversed gains to trade little changed following the release of a weaker-than-expected U.S. jobs report.
- Meanwhile, the safe-haven yen and Swiss franc gained on Friday. The euro was up 0.1% at $1.1307. Against the yen, the dollar dropped 0.4% to 112.75 yen. Versus the Swiss franc, the dollar slid 0.2% to 0.9179 francs.
- In emerging markets, Turkey’s volatile lira edged near to its record low on Friday, triggering direct central bank intervention to sell dollars.
- Bitcoin fell 5.00% at $53,720.0400.
Investors will digest a range of economic data including consumer sentiment and business optimism and an update on supply chain logistics. A range of companies including GameStop, Costco, Broadcom, and Lululemon among others will report earnings.