Bulls Wrangle Back Control Amid Persistent Volatility…..
U.S. equities rallied, paring some of a two-day sell-off, as volatility continued amid the festering variant and Fed tightening uncertainty. The markets remained nervous after the first cases of the Omicron variant were reported in the U.S., and this week Fed Chairman Powell shifted to a more hawkish stance. Treasuries were mixed with the short-end noticeably higher amid a continued flattening of the yield curve, while the U.S. dollar ticked higher in choppy action, and gold tumbled. Crude oil prices overcame early losses and were higher following a decision from OPEC and its allies, known as OPEC+, to stick to its plan to gradually increase oil production but with flexibility to adjust quickly if needed. In equity news, Bloomberg reported that Dow member Apple is telling suppliers that iPhone orders are slowing, and PVH missed on revenues and offered a mixed outlook. However, Snowflake offered stronger-than-expected Q3 results and guidance, and Dow component Boeing Company received positive news regarding its 737 MAX jet in China. In economic news, jobless claims rose by a smaller amount than expected and maintained its recent downtrend ahead of tomorrow’s key November nonfarm payroll report. Stocks in Europe saw widespread pressure amid the variant and inflation concerns, while markets in Asia were mixed.
The Dow Jones Industrial Average rallied 618 points (1.8%) to 34,640, the S&P 500 Index increased 64 points (1.4%) to 4,577, and the Nasdaq Composite gained 127 points (0.8%) to 15,381. In heavy volume, 5.0 billion shares of NYSE-listed stocks were traded, and 5.3 billion shares changed hands on the Nasdaq. WTI crude oil rose $0.93 to $66.50 per barrel. Elsewhere, the gold spot price lost $15.30 to $1,769.00 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—inched 0.1% higher to 96.11.
Weekly initial jobless claims came in at a level of 222,000 for the week ended November 27, versus the Bloomberg consensus estimate of 240,000 and compared to the prior week’s downwardly-revised 194,000 level, which was the lowest since 1969. The four-week moving average fell by 12,250 to 238,750, and continuing claims for the week ended November 20 dropped by 107,000 to 1,956,000, below estimates of 2,003,000. The four-week moving average of continuing claims decreased by 36,250 to 2,084,250.
Treasuries finished mixed, as the yield on the 2-year note was up 6 basis points (bps) to 0.62%, while the yield on the 10-year note was flat at 1.44%, and the 30-year bond rate lost 3 bps to 1.75%.
The Treasury yield curve has flattened noticeably as of late, as Fed Chairman Jerome Powell concluded his two-day Congressional testimony this week. Powell has moved the markets after suggesting the Central Bank could speed up the pace of its tapering campaign to combat rising inflation pressures, while also saying that the word “transitory” in referencing inflation should be retired. Powell’s remarks came as he warned that a recent rise in COVID-19 cases and the emergence of the Omicron variant could pose downside risks to employment and economic activity. He mentioned that greater virus concerns could reduce people’s willingness to work in person which would slow progress made in the labor market. Powell also said that inflation can be largely traced to the pandemic so far, but price pressures have spread more generally in recent months, and the risk of high inflation has increased.
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