Market action last week was volatile as uncertainty regarding the omicron variant roiled stocks. Today however the Dow found its footing and posted a solid gain of 647 points on lighter trading volume to close at 35,227. The driver behind this a decline in covid jitters. Last week the Dow fell about 1% and held firm at its 200 day moving average. The IBD market indicator however has slipped into “correction” mode. Value stocks like banks, materials and energy are market leaders today while tech was sluggish.
The research team at JP Morgan put out a piece last week basically saying the data on omicron is not really raising alarm bells at WHO and other health organizations similar to what was seen with the delta variant. They also noted that the history of virus mutations shows each iteration to be less deadly suggesting this latest variant’s bark could be worse than its bite and will not derail the recovery trade. Dr Fauci seemed to echo this sentiment over the weekend when he stated that based on early data “it does not look like there’s a great deal of severity to it”. Others are saying there is a possibility that this variant could be a vehicle for natural immunity.
The Economy and Earnings
Federal Reserve Chairman Jerome Powell testified to Congress last week and in it he took a more hawkish stance on inflation. What caught the most attention was his removal of the use of the word “transitory” to describe inflation indicating he feels we are in a more persistent period of inflation which could indicate a more forceful policy response is possible.
Where have all the workers gone? Last week’s jobs report missed estimates by a wide margin with only 210,000 new jobs being created against estimates calling for an increase of over 500,000. The unemployment rate fell to 4.2%. Combining wage increases and longer working hours labor costs have risen 9.4% over the past year. Wells Fargo estimates the two largest groups of workers contributing to the missing workers question are people 65+ who have chosen to retire and women aged 25-54 that are not returning to the workforce due to childcare issues. Higher wages however might eventually lure this demographic back into the job market if they can find suitable arrangements for their kids.
Shares of Boeing rose after the Chinese aviation regulator instructed airlines to make the changes needed to get the 737 Max flying again. The sino regulatory agency did extensive testing on the changes to the Max and finally concluded they were adequate to allow carriers to put the plane back into service. It has been 2 years since the initial grounding. Shares of Boeing were higher on the news.
Items of Interest
The scouts are out in the rain selling trees like hotcakes. The new scouts are learning the ropes and overall our annual Christmas Tree fundraiser is going well. The quality of trees is better than expected after hearing reports of lost trees due to the heat wave last summer.