Company / Analytics

Week 50 in Brief

North America

• U.S. stock closed lower Friday, booking losses for the week, as investors assessed the economic impact of the spread of the coronavirus omicron variant and monetary comments from central banks around the world.
• Markets Friday experienced quadruple witching, or the simultaneous expiration of single-stock options, single-stock futures, and stock-index options and stock futures, and end-of-quarter fund rebalancing which affected stocks.

How did the major indices perform?

• The Dow Jones Industrial Average dropped 532.20 points, or 1.5%, to close at 35,365.44, after earlier touching an intraday low at about 35,284.
• The S&P 500 fell 48.03 points, or 1%, to end at 4,620.64, after rebounding from an intraday low of about 4,600.
• The Nasdaq Composite slipped 10.75 points, or 0.1%, to finish at 15,169.68, after struggling to cling to gains in late afternoon trading, and earlier touching a Friday low at about 14,960.
• For the week, the Dow lost 1.7%, the S&P 500 dropped 1.9% and the Nasdaq Composite tumbled 3%.

What drove the US market?

• Coronavirus fears: President Joe Biden warned Thursday during remarks at a White House briefing that hospitals could be overwhelmed as the omicron variant spreads rapidly across the U.S., declaring the potential for a “winter of severe illness and death.” This added to doubts about the economy and the reaction of central banks to the persistent pandemic.
• Bond Markets: Fears of an economic slowdown were emanating out of the bond market early Friday, with the 10-year Treasury note yield falling below a closely watched level of 1.40%, before trading back to that reference point in the afternoon. A decline in long-dated Treasury yields often implies that investors are worried about the economic outlook.
• Monetary Policy: The slide in yields came even after the Fed on Wednesday announced plans to speed up the reduction in its monthly bond purchases so that the program ends in March instead of June. The central bank also projected three quarter-point interest rate increases next year as Fed Chairman Jerome Powell said there was a risk of high inflation persists.
• Geopolitics: US stocks went on a rollercoaster ride as investors continue to digest incremental omicron updates, geopolitical tensions increase as the US considers sanctions on Russia and China, and added volatility from triple witching.

Which US stocks were in focus Friday?

• Shares of General Motors Co. dropped 5.5% after the abrupt departure of longtime company executive Dan Ammann. Ammann, up until Thursday, was running GM’s self-driving car division, Cruise Automation. The stock closed at $55.16. • United States Steel Corp. warned of a “temporary slowdown” in orders during the fourth quarter. The company’s stock fell 1.6%, closing at $ 23.08. • Rivian Automotive shares slumped 10.3%, closing the week at $97.70 after its first quarterly report as a public company. • AMC stock rose as much as 22% after the theater chain said that the latest “Spider-Man” movie set box office records for a December release. • Tesla stock slipped as CEO Elon Musk offloaded another $884.1 million worth of shares in the EV maker. Since early November, his sales now total nearly $14 billion. • MicroStrategy CEO Michael Saylor, whose software company owns about $6 billion worth of bitcoin, said the cryptocurrency doesn’t need Warren Buffett’s endorsement to be wildly successful.

How did the European markets perform?

• European markets pulled back on Friday as concerns persisted about the spread of the omicron Covid-19 variant and the inflation outlook.
• The pan-European Stoxx 600 closed down by 0.5%, with autos slipping 2.5% to lead losses as most sectors and major bourses slid into the red.
• European markets have all but given back Thursday’s gains when investors reacted positively to central bank policy decisions. The Bank of England hiked interest rates for the first time since the start of the pandemic, citing a strong labor market and the need to return inflation towards its 2% target. The European Central Bank struck a more dovish tone, further cutting its pandemic-era bond-buying program but vowing to stay accommodative through 2022 and beyond.
• However, with inflation running at more than double target in the U.S., eurozone, and the U.K., concerns are lingering as to whether it can be brought under control.
• As markets still digest the ECB decision, banks fell with euro zone bond yields also on the decline.
• European countries prepared to impose further restrictions on travel and more on Friday. Travel stocks surged 2.3% on Friday with airlines in the lead.
• In individual stocks, Italian diagnostics firm DiaSorin slumped almost 10% after it forecast weaker 2022 sales as COVID-19 revenues plunged nearly 60%. Meanwhile, French petroleum company Rubis climbed 4.7% after acquiring solar energy group Photosol in a bid to speed up its transition to renewables.

How did Asian markets perform?

• Asian stocks tested 13-month lows on Friday, as fears about the Omicron variant of the coronavirus, inflation concerns, and hawkish pivots by the world’s major central banks knocked investor confidence.
• MSCI’s broadest index of Asia-Pacific shares outside Japan shed 0.7% on Friday to be down 2.28% on the week, and only just above the year low set last week.
• Chinese blue chips shed 1.35% and were heading for their worst week in three months, while an index of Hong Kong-listed tech firms hit a record low, not helped by news Washington put investment and export restrictions on dozens of Chinese companies.
• Meanwhile, Japan’s Nikkei shed 1.8% reversing the previous day’s gains.

Commodities and Bonds

• Oil prices fell with Brent crude down 0.83% to $74.40 a barrel and U.S. WTI losing 1% to $71.64 a barrel.
• Gold rose 0.1% to $1,799.50 per ounce, while bitcoin dropped 3.6% to $46,378.70.

Currencies

• The ICE U.S. Dollar Index was trading at 95.879, off nearly 1% since Wednesday’s high immediately after the Fed’s announcement.
• The pound held earlier gains made after the Bank of England on Thursday surprised markets by becoming the first G7 central bank to raise interest rates.

Next Week

Trading will remain very choppy for the rest of the year as investors grapple with falling trading volumes over the coming sessions.