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US market weekly: S&P 500 ends lower amid Omicron fears and Fed tapering asset purchases at a faster rate

US market weekly: S&P 500 ends lower amid Omicron fears and Fed tapering asset purchases at a faster rate

Last updated: 04 Dec, 2021 | 12:29 pm

US market weekly: S&P 500 ends lower amid Omicron fears and Fed tapering asset purchases at a faster rate

U.S. stock markets closed higher on Monday after President Biden reassured Americans that despite the latest Omicron coronavirus variant scare, the country will not undergo shutdowns or lockdowns. All the 11 major sectors of the broader index closed in the green, with the technology sector leading the way gaining 2.6%.

US indices closed sharply lower on Tuesday after Fed Chairman Powell proposed US lawmakers consider asset purchases quicker than planned given the present economic scenario. Investors also kept a close watch on news associated with the new Covid variant and assessed its impact and risks.

US stocks turned lower on Wednesday as more hawkish remarks from Fed Chair Powell compounded with concerns around the Omicron variant and its impacts on the economy. The S&P 500, Dow and Nasdaq each erased earlier gains to dip into the red.

US indices snapped the two-straight day omicron-driven sell-off, closing sharply higher on Thursday as investors look past the virus scare and monetary policy change jitters. Rebound in economic sensitive stocks led the Dow to mark the best percentage gain. All the 11 major sectors closed in the green, with the industrials, energy, financials and real estate sectors closing at least 2.7% higher. 

US stocks sank on Friday to end the week lower, as investors digested updates on the Omicron variant alongside the Labor Dept's Nov jobs report, which came in mixed compared to Wall Street's elevated expectations. The S&P 500 posted a weekly loss of 1.2% and Nasdaq underperformed with a weekly loss of 2.6%. 

Weekly market stats with IND

Let’s see the major developments during the week:

New coronavirus variant: The major equity indexes pulled back on news that the emergence of the omicron strain of the coronavirus could weigh on global economic growth and contribute to supply chain disruptions. The spread of the existing delta variant appears to have again picked up though economic progress is coming back on track. An average of 85k coronavirus cases have been reported each day in the United States while the total cases have crossed the 48.4 million mark. However, to battle this, the pace of vaccination has also picked up. About 59.7% of the eligible American population are fully vaccinated and over 71.2% have received the first dose.

Asset purchase Tapering: Powell says Fed may consider tapering bond purchases at a faster pace. Powell acknowledged that inflationary pressures had become broad enough and remained elevated for long that the central bank may consider accelerating the pace at which it tapers its monthly bond purchases. This is  interpreted as potentially moving forward the timeline for the Fed to begin increasing short-term interest rates. Powell also cited the uptick in the number of COVID-19 cases and the emergence of the omicron variant as possible catalysts for further supply chain disruptions as well as potential headwinds to the economic recovery and the labor market’s gradual rebalancing.

Weekly Jobs Report: The Labor Dept's Nov jobs report showed a disappointing rate of hiring for the month even as the unemployment rate fell to a fresh pandemic-era low. Payroll gains came in at 210,000 less than half the 550,000 consensus economists were expecting. The jobless rate fell to 4.2%, dipping more than anticipated from October's 4.6%. 

Fixed Income market: Concerns about the omicron variant and Fed policy likewise moved fixed income markets. The Treasury yield curve flattened over the week, with short-maturity yields rising and long-term rates decreasing. Tax-free municipal bonds generated positive returns through most of the week and performed in line with U.S. Treasuries at the broad sector level. Treasury yields also dipped as investors bought safe haven assets, and the yield on the benchmark 10-year note slid below 1.4%.