Equities moved higher after risks that the Omicron COVID variant would slow down economic activity wanned. The S&P 500 index returned 3.84% last week, closing Friday at an all-time high. Technology, materials, and energy names outpaced other sectors because of heightened inflation expectations. YOY growth in CPI hit 6.8%, the highest inflation rate in 39 years, cementing the hawkish tone from the Federal Reserve Chairman. The reopen trade ripped higher after a soft few weeks as Omicron risks subsided.
U.S. Treasury bond yields increased across the yield curve last week. Yield increases were led by the longer maturity end of the yield curve, which saw the largest weekly yield increases in months. At the end of the week, investors turned their attention to inflation data, which has been a key topic as the economy navigates COVID-19 related headwinds. The Consumer Price Index, or CPI, increased 0.8% in November, which came in 0.1% higher than expected. The CPI is up nearly 6.8% versus a year ago with real average hourly earnings down nearly 2% on the year. Though the CPI report was largely in-line with expectations, Friday’s CPI data further supports the realization that inflation is not transitory and puts an even more critical eye on next week’s FOMC meeting.