December 10, 2021

Weekly Market Commentary December 6th to December 10th 2021

On the heels of last week’s Jobs Report, Weekly Jobless Claims surprised with a tally of 184,000, the lowest level since 1969. Part of the shocking drop is due to recent methodology changes by the Labor Department, but most importantly, the figure shows that employers are reluctant to lay off workers at a time when they are desperate for additional help. Elsewhere, the Job Openings and Labor Turnover Survey (JOLTS) showed job openings of 11 million, well ahead of the 10.4 million estimate. Labor demand remains sky-high while many workers, especially older workers, are reluctant to rejoin the workforce. Expect these factors to help maintain elevated wage growth.

The Consumer Price Index was the most important economic reading of the week. The reading showed that inflation accelerated 0.8% monthly, and 6.8% over the last year. Price gains were driven by autos due to the semiconductor shortage, lodging, and gasoline. However, price increases were felt across almost all segments of the economy. For core goods, which strip out the volatile prices of food and energy, inflation was 0.5% monthly and 4.9% annually. These numbers were all in-line with analyst estimates.

Finally, the University of Michigan Consumer Sentiment survey showed that consumers were more upbeat than they were a month ago. Both the ‘Current Conditions’ and ‘Expectations’ gauges beat analyst expectations. Consumers expect inflation to total roughly 5% in the next year and 3% over the long run.

Markets recovered as news flow surrounding the Omicron COVID-19 variant improved. The S&P 500 soared 3.8% to 4,712, slightly outpacing the NASDAQ which was up 3.6% to 15,630. The Dow Jones Industrial Average was even better, jumping 4% to end the week at 35,971. The yield on the 10-Year U.S. Treasury rose 15 basis points, ending the week at 1.49%.

Next week’s economic releases will include Producer Inflation, Small Business Optimism, Retail Sales, and housing data.