November was a pretty interesting month for U.S. equities, as high inflation and the Omicron variant stirred up market volatility.
Getting things started on November 5th, non-farm payroll data offered traders a bullish surprise, with 531,000 jobs created versus expectations of 450,000 for October. U.S. indices rallied off the bullish data. Attention then shifted to U.S. Consumer Price Index (CPI) data on November 11th, showing inflation at a 30-year high in the U.S.
The S&P 500 held steady and even rose slightly after the inflation data was released, with additional gains seen courtesy of surprisingly bullish retail sales data. The retail sales data release showed American consumers spent 1.7% more in October. While the retail data was widely cheered, some folks questioned the data’s integrity due to inflation driving higher prices.
Black Friday Spiral & Fed’s Changed Tune
The S&P 500 was having a positive month so we sat down to enjoy Thanksgiving dinner. Black Friday changed that, as a concerning new variant, Omicron, began to headline every title in the news cycle. In an abbreviated trading session ending at 1 p.m. ET, news of the Omicron variant sent markets reeling, and the Dow Jones Industrial Average suffered its worst Black Friday since 1931.
Major indices showed mixed results at month’s end. For November, the S&P 500 shed 0.83%, the Nasdaq 100 added 1.80%, and the Dow Jones Industrial Average decreased by 3.73%.
As the markets continue to deal with high inflation and now the Omicron variant, the Federal Reserve is signaling a faster pace of tapering and a sooner-than-expected increase of interest rates. The present market consensus is for the first interest rate hike in September of 2022, but will things change with this new Omicron variant ?
Strategic Petroleum Reserve Tapped–As Is Fed Chair Powell
Noting a need to combat high gasoline prices, President Biden ordered 50 million barrels of oil to be released from the Strategic Petroleum Reserve in November. The price of crude oil (West Texas Intermediate Crude Oil) fell on the news shortly after the announcement. There are now talks of further releases from strategic reserves. Only time will tell as to what oil really will be released.
In other news, Jerome Powell received renomination for a second term as Federal Reserve chair. The appointment is pending congressional approval. If approved, his new four-year term will begin in February 2022.
As of the time of writing, the market has been experiencing continued volatility. December 1st featured a 1,000-point swing in the Dow Jones Industrial Average most likely due to the first U.S. Omicron case being confirmed. On December 2nd, the Dow soared over 600 points, and on the 3rd, dismal jobs data for the month of November sent major market averages lower.
While it’s important not to focus on day-to-day movements, it is good to know about the elevated volatility in the last few sessions. These wider price ranges can create opportunities for investors with certain risk tolerances, especially if Santa Claus shows up soon for his rally. Next up, traders are looking to the latest inflation data via the CPI release on Friday, December 10th.
Disclosure: Emerald Advisors, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.
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