All data is for the week ended January 7, 2022
Stocks
Equities were lower across the major world indices, with the S&P 500 down 1.83%, the Russell 2000 declining 2.91% and the NASDAQ retreating 4.52%. Overseas markets were down 0.29% in the developed markets (MSCI EAFE) and down 0.47% in the emerging markets (MSCI EM). Growth stocks underperformed value stocks in the US. By sector, energy and financials were the best performers while real estate and technology were the poorest performers.1
Fixed Income
Interest rates rose and bond values declined following release of the Federal Reserve board’s notes from their mid-December meeting. The Fed appeared more likely to raise rates sooner and at a faster pace than prior comments given their individual outlooks for a faster growing economy, a tighter labor market and rising inflation. The impact of Covid remains an unknown.2 The 2-year treasury yield ended the week up 14 basis points to 0.87% while the 10-year treasury finished 24 basis points higher than the prior week at 1.76%.3
Commodities
Energy prices rose sharply last week, with West Texas crude closing up 4.9% to $78.90 per barrel.4 Hedge funds and other investors have returned to buying energy as fears over the economic impact of the Omicron variant of Covid have been fading.5
Economic Data
Unemployment rate dropped to 3.9% for December from 4.2% in November, better than the consensus estimate of 4.1%. Jobs growth, however, was far below expectations likely due to Covid while the numbers for the two previous months were adjusted significantly higher. Wage growth of 4.7% year-over-year (0.6% month-over-month) indicated persistent upward pressure on labor costs.6
The key services index slipped to 62.0 in December vs. expectations of 67.0. However, it was the 10th straight month with a reading north of 60, the longest period of strength in the index’s history. 7
The key manufacturing index slipped to 58.7 in December, missing expectations of 60.2 and declining from the prior reading of 61.1. While the U.S. manufacturing sector remains in a demand-driven, supply chain-constrained environment, the report noted, there are indications of improvements in labor and supplies as all six of the largest industries displayed moderate-to-strong growth last month.8
Company News9
Financial stocks held in Gradient Investments strategies performed especially well last week as interest rates rose (see Fixed Income above). Regions Financial (RF) increased 15.23%, Citizens Financial (CFG) rose 14.75%, Fifth Third Bank (FITB) gained 12.06%, Global Payments (GPN) rose 11.11%, Bank of America Corp. (BAC) advanced 10.54%, American Express (AXP) increased 6.86% and JP Morgan Chase (JPM) added 6.19%.
Did you know…
Felis nigripes a.k.a. “the deadliest cat on earth” is an African Black-footed Cat which weighs in at just under 5 lbs. It kills 10-14 rodents or birds per night to satisfy its accelerated metabolism. It has a kill rate of 60%, whereas a lion’s kill rate is about 25%.
Mariann Montagne, CFA
Portfolio Manager
Sources:
1 JP Morgan Weekly Talking Points 1-10-22
2 Minutes of the Federal Open Market Committee Dec. 15-16
5 Reuters, “Oil Bulls Increasing Confident as Omicron Risk Fades” 1-10-22
6 Bureau of Labor Statistics 1-7-22
7 Institute for Supply Management Services Report 1-6-22
8 Institute for Supply Management Manufacturing Report 1-4-22
9 All weekly changes in company stock prices: Yahoo Finance
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