Monday, January 3, 2022
Happy New Year! We closed out 2021 on a down note, but it was actually quite a nice year for the markets: the Dow bounced back from +7.25% in 2020 to +18.73% in ’21; the Nasdaq dialed back almost half its 2020 gains to +22.14%; and the S&P 500 took home the 2021 prize, having grown +26.89% on the year. This is the first time in five years the S&P has outperformed the Nasdaq.
Pre-market indexes are picking up these solid growth numbers to start 2022 trading this morning: the Dow is +140 points, the Nasdaq is +120 and the S&P 500 is +25. We start off a tad light on economic prints this morning, though after the opening bell we’ll see new results in Markit Manufacturing for December (expected at 57.8) and Construction Spending for November (expected 50 basis points hotter than the previous month to +0.7%).
That’s not to say we don’t have a big week for economic data, we do: both private-sector payrolls from
Automatic Data Processing
ADP
Wednesday and non-farm payrolls from the
U.S. Bureau of Labor Statistics (BLS)
Friday will carry plenty of weight in depicting the domestic labor force. Expectations are for 373K on ADP for the month of December and 405K on the BLS. These are moderations from the wildly askew previous month, which showed 534K private-sector jobs filled in November and just 210K in the BLS figure.
The Unemployment Rate did come down to 4.2% in the last BLS report, bringing us down to early 2018 levels — prior to the historic lows seen in the months leading up to the Covid pandemic — and expected to tick down further. The x-factor here would have to be the emergence of the Omicron variant of the Covid-19 coronavirus, reported the day after Thanksgiving and proved a highly contagious variant of the disease. We saw people home from work and school over the past several weeks, but the question is whether this will show up in job layoffs, furloughs, or positions taken off the market temporarily.
This week’s we’ll also see minutes from the latest Fed meeting mid-last month out this Wednesday. The median expectation among voting members was for three interest rate hikes coming in 2022, dependent on how much inflation is in the economy. The Fed minutes will break down where the voting members were looking ahead to this year; the Fed’s next meeting on monetary policy is January 25th and 26th.
Futures have come down a tad in just the past few paragraphs: we’re still looking for a positive open for 2022, but only the Dow remains up triple-digits. News on flight cancellations averaging over 2000 this past weekend — creating lots of bleak holiday travel narratives across the country, with Covid-related staffing shortages and patches of winter weather — and we’re just emerging from holiday season dormancy with Omicron still making its way through the population. But underlying these challenges remains an economy of still-strong demand and improving supply chains.
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