The S&P 500 Index posted a -2.18% return last week due to Friday’s 2.27% slide producing its largest single-day point drop in 2021 with a 106.84-point decline. Prior to Friday’s decline, the index had gained 9.37% for the fourth quarter and 26.78% YTD. U.S. initial jobless claims of 199K were well below the 260K expected and the previous week’s 268K as claims continue to decline from the pandemic highs. President Biden announced a release of 50 million barrels of oil from the U.S. Strategic Reserve in efforts to combat any sense of strain at the pumps. The average price of gasoline in the U.S. is $3.70 per gallon, approximately $1.25 higher than one year ago. Lower trading volumes were expected on Black Friday, but markets were forced to digest the news of new Covid-19 variant Omicron coming out of Botswana and South Africa. Questions regarding the new quickly spreading variant, including the effectiveness of current vaccines and the difference in strength to other variants, caused concern.
Last week, the yield curve flattened as short-end yields held steady while yields on longer-term maturities fell. Yields rose across maturities through Wednesday, but the announcement of a new Coronavirus variant discovered in South Africa pushed bonds higher on the last day of the shortened trading week. The strain is thought to be the most mutated variant yet creating concern over the effectiveness of current COVID vaccines and the durability of global economic recovery. “This is the most significant variant we have encountered to date and urgent research is underway to learn more about its transmissibility, severity and vaccine-susceptibility,” a UK health official explained. In economic news, jobless claims fell to 199,000, the lowest level since 1969, and personal spending rose 1.3%. Both reports comfortably beat consensus expectations.
