Markets experienced a rough first week to 2022 with the S&P 500 losing 2.49% and cryptocurrencies falling across the board. The Santa Claus rally continued for the first two trading days of the new year but it was all downhill after that.
Investors took in new data from the Federal Reserve meeting this week, where the Fed expressed a chance for earlier and faster rate hikes, before trying to parse a mixed December Employment Situation Report. Meanwhile, cryptocurrencies continue to fall as investors seem to be pulling out of the market even as a lot of companies are entering the space with their own NFTs.
December Jobs Report
199,000 quickly became a headline on Friday as that was the number of jobs added last month, according to the establishment survey portion of the monthly jobs report. That number was far below estimates for 440,000 new jobs. However, just like most data, there is far more going on under the surface.
The establishment survey showed the economy adding 199,000 jobs in December but a survey of households showed far more promising results. The household survey showed a 483,000 fewer unemployed workers and a rise of 168,000 in the labor force, suggesting a much larger gain of 651,000 new jobs.
In fact, the unemployment rate also showed signs of strong jobs growth with the rate dropping from 4.2% to 3.9%. Economists had expected a smaller decrease to 4.1% along with the estimated 440,000 jobs.
Additionally, 3.9% is an extremely strong unemployment rate, especially within two years of the start of the coronavirus pandemic. A sub 4% rate is a strong sign for where the economy is now as typically rates don’t go too far below 4%. However, while sub 4% rates are great, they typically do not last for long. The only time rates have been able to sustain that level for more than two years was from 1966-1969 which was quickly followed by a recession and rates exceeding 6% at the peak.
The December jobs report was better than the headline suggests but investors still have reasons to be concerned about where the economy is headed. The economy has recovered well from the pandemic due partly to aggressive monetary and fiscal policy in addition to the quick development of vaccines. Now tighter policies are needed in addition to a resolution of supply chain disruptions in order to avoid an overheating economy and continued high inflation.
Earnings Round-Up
Earnings were still light this week coming off the holidays but a few big names did report their quarterly performance.
Walgreens Boots Alliance (WBA) managed to surpass earnings and revenue estimates but its stock fell as the company warned of rising labor costs to keep up with COVID vaccines and tests. Meanwhile, Bed Bath & Beyond (BBBY) managed to miss on revenue and earnings in addition to lowering its outlook for the full-year, but retail traders managed to shrug that off with the stock rising 8% anyway after being down over 9% in premarket trading. Lastly, Constellation Brands (STZ) shares fell despite an earnings and revenue beat along with an upwards revised guidance. Perhaps investors did not take to the announcement that it struck a deal with Coca-Cola (KO) to offer Fresca canned cocktails.
All in all, the S&P 500 fell 2.49%, the Dow Jones Industrial Average lost 0.97%, and the NASDAQ dropped 5.66%.
