12|28|2021

Santa’s Coming | December 24, 2021

AUTHOR: Jason Roque, CFP®, APMA®, AWMA®
TITLE:   Investment Adviser Rep – CCO
TAGS: S&P 500, NASDAQ, CPI, PPI, Oil, Retail Sales, Sentiment
  

Markets lost ground for the second week. Does this say more about the last two weeks or the week ahead?

Monday                       S&P 500 0.11% | NASDAQ 0.41%

Markets opened the week in a muted tone. There was very little movement as Consumer Price Index (CPI) data was awaited on Tuesday.

Tuesday                        S&P 500 1.12% | NASDAQ 1.54%

CPI data for February showed inflation inching up slightly. Markets opened in the red on the news, but an earnings beat by Oracle allowed equities to march higher.

Wednesday                 S&P 500 0.19% | NASDAQ 0.54%

Crude oil inventories fell when a surplus was expected, which will further support higher prices for energy. Interest rates climbed on the back of the higher than expected CPI data from Tuesday. Growth stocks lagged as the data implies the Federal Reserve Board (FRB) will be less likely to cut rates.

Thursday                     S&P 500 0.29% | NASDAQ 0.30%

The Producer Price Index (PPI), a wholesale inflation gauge, rose in February to 1.6%. Retail sales advanced less than expected and initial jobless claims remained benign. A strong jobs market with firming inflation does not bode well for future rate cuts. Markets sold on the news, though not aggressively, as hope remains for FRB rate cuts later in the year.

Friday                          S&P 500 0.65% | NASDAQ 0.96%

Consumer sentiment is projected to fall to 76.5 in March from 76.9 in February. While lower, February and March are the first readings in the 70’s since August of last year. The week closed out on a sour note as commodity prices rise with inflation data. Further concerns mount that the inflation fight may have longer to go before a rate cut.

Conclusion                  S&P 500 0.13% | NASDAQ 0.70%

This is the first back-to-back losing weeks for the market in 2024. This leads to an FRB meeting week where guidance about potential future rate cuts will be hotly watched. Not only is the FRB meeting next week, but there is very little in the way of economic data for the week. This puts all the more focus on the FRB. 

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Is Santa’s rally coming, or will Omicron steal the show? Most importantly, what does it all mean for 2022?

Monday

The week opened in free fall as the Nasdaq led the way lower. Omicron news and the Build Back Better plan getting nixed seemed to sour investors to open the week. Haven stocks did not gain interest in leu of an equity sell off. This came as a result of the anticipated Federal Reserve Board (FRB) rate increases in 2022.

Tuesday

Markets spiked up on Tuesday. It was strongly seen as investors deciding to ‘buy the dip’. There has been a 3% pullback over the last few sessions. The S&P 500 gained 1.78% on the day.

Wednesday

‘Buy the dip’ continued on Wednesday. One clear distinction from a normal ‘buy the dip’ is that volumes are definitely holiday lite. That means that very little can be made of the current rally. The S&P 500 ended up gaining 1.01%.

Thursday

In a holiday shortened trading week, markets climbed to close the week.  A word of caution would be that trading volume has been extremely light! It has been running 25% of that of a normal trading day. Not surprising, but cause for caution that this buy spree may not be well founded.

Friday

Merry Christmas! Don’t shoot your eye out!

Conclusion

The week started with an echo of last week’s trading weakness. It very quickly shifted to perhaps the beginning of a Santa Claus rally. Historically, this occurs the week between Christmas and New Year’s. Again, on light trading volume. This could lead to a strong year end but could be of concern for a pullback in January. Also, given past circumstances, the US will likely be in the thick of the Omicron variant come January.

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Always remember that while this is a week in review, this does not trigger or relate to trading activity on your account with Financial Future Services. Broad diversification across several asset classes with a long-term holding strategy is the best strategy in any market environment.
Any and all third-party posts or responses to this blog do not reflect the views of the firm and have not been reviewed by the firm for completeness or accuracy.