December 3, 2021

Weekly Market Commentary November 29th to December 3rd 2021

The big story of the week was in the employment situation. Nonfarm Payrolls, the primary job-creation measure put out by the Bureau of Labor Statistics, disappointed at 210,000 newly created jobs in November. Estimates ranged from 306,000 to 625,000 so this number was a big miss. There were upward revisions to prior months so the news wasn’t completely bad; and folks should take into consideration just how wide the disparity in economic data has been since the start of the pandemic. On the positive side of employment, the November unemployment rate fell a whopping 0.4% to 4.2%, a number we haven’t seen since the start of the pandemic. And the Labor Force Participation Rate, a key statistic when looking at the employment “big picture” came in at 61.8% which is the highest reading since March of 2020. The overall sense is, despite the lower Nonfarm number, the labor market is tight and with inflation remaining unusually high, it is getting harder and harder for the Fed to keep putting off short-term rate increases. Expect continued bond-buying tapering and increasing discussions about rate increases maybe sometime late next year.

Elsewhere in the economy, we generally had good news for the week. On Monday, Pending Home Sales for October came in much higher than expectations at 7.5%. On Tuesday, the Consumer Confidence Index matched expectations at 109.5, and while this has been trending lower in the past few months, look to harder consumer-driven data such as Retail Sales or Personal Spending for stronger clues on consumption. We also had the Institute of Supply Management (ISM) release its November report for both services and manufacturing. No surprises with the ISM Manufacturing Index which matched expectations at 61.1%. However, on the ISM Services side, the 69.1% print was very strong, beating the consensus of 65.0% handily. Folks are spending money, but due to supply-chain issues, the shift has been from goods to services. Lastly, on Friday, in a sign that there just might be some loosening of those supply-chain constraints, October Factory orders also came in as a big win at +1.0% vs. consensus of +0.4%.

Despite the generally good economic news for the week, stocks continued to be battered by the emergence of the COVID/Omicron variant and the news of its unwelcomed arrival in the US. The S&P 500 finished the week down -1.7% to 4,538 while the tech-heavy NASDAQ dropped -2.6% to 15,085. The Dow Jones Industrials was also down for the week, ending at 34,580 (-0.9%). Shorter yields were up as the 2-year US Treasury finished at 0.60%, while longer bonds rallied with the 10-year and 30-year closing the week at 1.37% and 1.69% respectively.

Next week’s economic releases include CPI inflation data, the UMichigan Consumer Sentiment Index, and weekly employment data.