The S&P 500 index started the new year in the red, falling 1.9% in the first week of 2022, even as the energy sector jumped 11%. The market benchmark is now up 22% from its year-ago level.
The gains over the past year came amid the authorizations of COVID-19 vaccines and treatments while the US economy has been recovering from 2020’s pandemic-related closures. However, as the highly contagious Omicron variant has prompted record daily COVID-19 case levels in the US in recent days, leading to staffing issues across industries, investors have seen that the virus still has the ability to disrupt business.
December jobs data released Friday by the Labor Department showed last month had the smallest monthly jobs gain since December 2020. The increase in nonfarm payrolls for December amounted to 199,000, about half of the amount expected according to the Econoday consensus. This followed an increase of 249,000 in November, which was revised up by 39,000 jobs.
Still, December’s unemployment rate fell to 3.9%, the lowest level since February 2020, from 4.2% in November, and surpassed expectations for a 4.1% rate. The larger-than-expected drop in the unemployment rate pushed market bets higher that the Federal Reserve’s Federal Open Market Committee will raise interest rates in March. Minutes released last week from last month’s FOMC meeting showed some participants suggested rate increases may begin sooner and at a faster pace than previously expected.
The real estate sector had the largest percentage drop of the week, down 4.9%, followed by a 4.7% decline in technology and a 4.6% drop in health care. Other sectors in the red included communication services, consumer discretionary and utilities.
However, there were still four sectors in the black, led by an 11% surge in energy and a 5.4% climb in financials. The other gainers were industrials and consumer staples.
Next week, economic data on tap include the release of the December consumer price index on Wednesday, the December producer price index on Thursday, and December retail sales, import prices and industrial production on Friday.
The Q4 earnings season will also kick off toward the end of next week, with Delta Air Lines (DAL) expected to release its Q4 financial results on Thursday, followed by reports from Wells Fargo (WFC), JPMorgan Chase (JPM) and Citigroup (C) on Friday.
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