Markets Wrap Up 2021 Lower, but Solidly Higher for the Year…..
U.S. equities closed out 2021 on the downside, but all three major indexes registered solid gains on a yearly basis for the third-straight year, with the S&P 500 notching record highs 70 times along the way. Equity news and economic reports were in short supply and volume was light, but investors continued to assess the omicron variant, solid economic and earnings growth, rising inflation pressures, and the commencement of monetary policy tightening. Treasuries were mostly higher to apply modest downside pressure on yields, and the U.S. dollar traded lower, while gold gained ground and crude oil prices saw pressure. Asia finished mixed to close out the year, and Europe dipped in an abbreviated session, with several markets in both regions closed for the holiday.
The Dow Jones Industrial Average declined 60 points (0.2%) to 36,338, the S&P 500 Index lost 13 points (0.3%) to 4,766, and the Nasdaq Composite fell 97 points (0.6%) to 15,645. In light volume, 2.6 billion shares of NYSE-listed stocks were traded, and 3.3 billion shares changed hands on the Nasdaq. WTI crude oil moved $1.78 lower to $75.21 per barrel. Elsewhere, the gold spot price gained $17.10 to $1,831.20 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—fell 0.4% to 95.59.
Markets were mixed for the week, as the DJIA gained 1.1%, the S&P 500 increased 0.9%, but the Nasdaq Composite ticked 0.1% lower. For the year, all three indexes posted gains for a third-consecutive time, as the DJIA was up 18.7%, the S&P 500 increased 26.7%, and the Nasdaq Composite advanced 21.4%.
Equity news was relatively quiet in the final session of 2021, which has seen the S&P 500 post a third-straight year of double-digit gains, led by the Energy and Real Estate sectors, which were nearly 47.0% and 43.0% higher, respectively. All sectors were comfortably in the green for the year with the Utilities sector the under performer but still up almost 14.0%. The broad indexes saw strong gains but underneath the surface volatility was palpable as the markets grappled with multiple COVID-19 variants, surging inflation pressures, and a move by the Fed to ramp-up reining in its monetary policy accommodation. However, economic data has been strong, along with corporate earnings.
The economic calendar was void of any major releases to close out the year and Treasuries finished mostly higher for the day, as the yield on the 2-year note dipped 1 basis point (bp) to 0.73%, the 10-year note was flat at 1.51%, while the 30-year bond rate declined 2 bps to 1.91%.
The Treasury yield curve has flattened noticeably with the short end rising solidly amid the omicron variant uncertainty, and as the Fed announced that it will double the pace of tapering its monthly asset purchases and could raise rates three times in 2022.
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