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Stock Market Today: December 1, 2021

Stock Market Today: December 1, 2021

John E. Seibert III | 12/1/2021

Before The Bell - The indices fell sharply yesterday as fears about the spread of the Omicron variant of the coronavirus picked up. Additionally, traders have begun to worry that the Federal Reserve will not be as accommodative with its interest-rate policy as it has been in the past. Fed Chairman Jerome Powell stated to Congress that it is now appropriate for the central bank to wind down asset purchases more quickly than planned. Mr. Powell also backed away from the characterization of inflation as transitory. These statements signaled that the first interest-rate hike might come as early as May. This more hawkish monetary policy stance from the Federal Reserve likely caused traders to sell off companies, especially those with heavier debt loads. The markets weakened throughout the day and ended not too far from their daily lows. All told, the S&P 500 fell 88 points, the NASDAQ was off 245 points, and The Dow Jones Industrial Average declined 652 points.

 

The futures market started positively and staged a rebound of sorts in the early evening after the rough day in the stock market. Indeed, futures continued higher throughout the night, and by the time the Automatic Data Processing (ADP) Payroll report came out, the S&P futures were indicating a recovery of more than half of Tuesday’s losses. The ADP report, which stated that 534,000 jobs were added during November, came in around expectations, and the futures didn’t move too much on the news, given they were already well into the green. Still, this momentum may well be tested by this morning’s manufacturing activity data from the Institute for Supply Management (due at 10:00 A.M. EST) and further testimony from Chairman Powell and Treasury Secretary Janet Yellen today.

 

Overall, yesterday was a very bearish day for the market, as decliners outpaced advancers by a 3.8-to-1.0 ratio. Technology stocks were among the best performers on the day, aided by solid advances in a few key names, including industry behemoth Apple (AAPL); this was only a relatively good performance, however, as the entire sector was below the breakeven level. On the other end of the spectrum, communications equities were among the weakest of the day.

 

In commodity news, oil prices fell yesterday as worries about the Omicron variant on global output had traders worried about oversupply in the market, but have recovered some of the loss this morning. Meanwhile, Fed Chairman Powell’s testimony was a key factor in the rising yields of U.S. Treasury bonds, as traders largely sold their holdings and moved away from the safe-haven asset. The VIX Volatility Index was notably higher as demand for options protection rose sharply.

 

Looking ahead, several economic reports will likely impact the markets in the coming days. These will include initial weekly jobless claims on Thursday, while several regional Fed leaders will make remarks to the public. Nonfarm payrolls and the unemployment report are on the docket for Friday, which should show how well the economic recovery is faring. Additionally, we are nearing the end of earnings season, and the number of reports will continue to decline through the rest of this month. Overall, we think changes in sentiment regarding the coronavirus pandemic and interest rates will drive trading.  - John E. Seibert III

 

At the time of this writing, the author did not have positions in any of the companies mentioned in this article.

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