Weekly Recap 3 – 7 Jan.

The last trading week ended with a decline in the US dollar as risk appetite improved with optimism around Omicron, in addition to data out of the USA. As a result, the dollar index, which measures the strength of the US currency against a basket of currencies, fell to 95.7.

The US Nonfarm Payrolls rose by 199K in December versus the median forecast for 400K. That meant the pace of job gains was roughly in line with November, when 249K jobs were added to the US economy.

The unemployment rate fell to 3.9% from 4.2% in November and continued to close in on its pre-pandemic levels of 3.5% in December. 

Private employment rose by 211K, below expectations for a 365K below last month’s reading of 279K. 

The MoM gain in Average Hourly Earnings came in at 0.6%, above expectations for it to rise to 0.4% from November’s 0.4%. In addition, the YoY rate of Average Hourly Earnings growth came in at 4.7% in December versus median forecasts for a fall to 4.2% from 5.1% (revised up from 4.8%). 

Wall Street

Wall Street ended the first week of the new year with daily and weekly losses as investors worried about a looming increase in US interest rates and developments around the spread of the Omicron mutant.

The S&P 500 and Nasdaq closed lower on Friday, as the latest US employment report fueled investor concerns about the Federal Reserve’s approach to raising interest rates to tackle inflation.

The luxury goods and technology sectors led to the decline in the S&P500 index on Friday, while the S&P500 index of financial and banking institutions index extended the recent gains.

And the rise in US Treasury yields supported bank stocks.

10-year bond yields were at their highest since January 2020.

And the S&P 500 index ended the trading session down 19.00 points, or 0.42%, at 4,676.51 points, while the Nasdaq Composite Index fell 146.29 points, or 0.98%, to 14934.57 points.

The Dow Jones Industrial Average fell 8.27 points, or 0.02%, to 36,228.20 points.

Europe

The pan-European Stoxx 600 ended the session down 0.5%, with European indices holding onto the red.

After inflation in the Eurozone hit a new record in December, it raised more questions about the European Central Bank’s policy.

Data on Friday showed headline inflation came in at 5% compared to last year’s same month.

This figure represents an all-time high and follows November’s high of 4.9%.

The travel and leisure sector was the worst performer, declining by 1.6 percent.

According to data compiled by Dow Jones, the data was disappointing after economists had forecast that the US economy would have added 422,000 jobs in December. The unemployment rate was expected to come in at 4.1%.

Oil

Oil prices settled lower on Friday as the market was affected by supply concerns due to the unrest in Kazakhstan and production outages in Libya, along with the release of a below-expected US employment report and its potential impact on Federal Reserve policy.

Brent crude futures fell 24 cents, or 0.3 percent, to settle at $81.75 a barrel. US West Texas crude futures also fell 56 cents, or 0.7 percent, to settle at $78.90 a barrel.

Both are on track to register a near five percent increase in the first week of the year, with prices reaching their highest since the end of November, driven by supply concerns.

Security forces appeared to take control of the streets of Almaty, Kazakhstan’s largest, on Friday, while the president announced the restoration of most constitutional order a day after Russia sent troops to counter an uprising.

Libya’s production fell to 729,000 barrels per day, from a high production of 1.3 million barrels per day last year, partly due to pipeline maintenance work.

Coronavirus

A Reuter’s statistic showed that more than 304.97 million people were infected with the emerging coronavirus worldwide, while the total number of deaths resulting from the virus reached five million and 834,631.

Infections with the virus have been recorded in more than 210 countries and regions since the first cases were discovered in China in December 2019.

Week Ahead

Federal Reserve Chairman Jerome Powell is scheduled to testify Tuesday before the Senate Banking Committee at a hearing to confirm his nomination for a second four-year term as Fed chair, while Lyle Brainard, the Fed’s governor, will appear before the same committee two days later to confirm her nomination for the position of Vice President.

Several Federal Reserve officials are scheduled to speak over the next week, including Esther George, James Bullard, Loretta J. Mester, Charles Evans, Thomas Barkin, and John Williams.

Next week, earnings season begins in earnest as investors await fourth-quarter results announcements by several major banks, including J. B. Morgan Chase, Citigroup Inc., and Wells Fargo & Co., before the market opens on Friday.