Market Data as of Week Ending: 1/7/2022 unless noted otherwise
U.S. stock indexes declined last week as bond yields rose and cases of omicron surged across the globe. Analysts are expecting fourth quarter earnings to grow more than 20% for the S&P 500. If realized, that will mark the fourth consecutive quarter of earnings growth greater than 20%. Despite favorable expectations for the fourth quarter, growth stocks tumbled with the expectation of higher interest rates and potential economic impact of another coronavirus surge. Size was not a significant factor but performance across sectors showed a wide range of outcomes. Energy was up more than 10% followed by gains in the financials, industrials, and consumer staples sectors. The rest of the major economic sectors declined for the week. Both developed foreign and emerging market stocks ended the week with small losses and outperformed U.S. stocks.
U.S. Treasury yields spiked and the 10-year finished the week at 1.76%. The sharp rise in yields follows the release of meeting minutes from the December meeting that indicated an expectation that interest rates may be increased as soon as March. All segments of the bond market declined with shorter maturities outperforming longer duration bonds. Investment grade corporate bond yields and high yield corporate bond yields also rose and finished the week at 2.6% and 5.1%, respectively.
Economic data showed slower growth in employment with 199,000 jobs added in the month of December. That brought the total to a record of approximately 6.4 million jobs added in 2021, even though there are still nearly 3.6 million fewer jobs prior to the start of the pandemic. In other employment data the JOLTS survey reported that job openings decreased to 10.6 million and weekly initial jobless claims rose to 207,000. The Institute for Supply Management (ISM) reported weaker than expected results for both the manufacturing and service sector, but indicated signs that supply challenges are starting to abate. In Europe, inflation reached a record 5% annual increase for countries in the European Union and cases of coronavirus reached record levels.