The Market Today

Bad Weather and Covid Shutter Flights; Omicron Appears Less Damaging to Economy


by Craig Dismuke, Dudley Carter

TODAY’S CALENDAR

This week’s economic calendar is very quiet and kicks off this morning with only the Dallas Fed Manufacturing Activity report (9:30 a.m. CT).  The index is expected to inch up from 11.8 to 13.0.


OTHER ECONOMIC NEWS

ICYMI – December 24, 2021 Weekly Market Recap: Treasury yields and equities both recovered higher following an early stumble as investors digested additional data showing Omicron may produce milder health effects than earlier variants. Markets struggled Monday as sentiment took a hit over the weekend after more European countries announced tighter restrictions. Additionally, Senator Manchin said he wouldn’t support Build Back Better, putting the President’s spending aspirations, at least in the current form, on life support. However, market trends brightened quickly. Moderna said a booster shot of its vaccine significantly increased protection against Omicron. President Biden stressed vaccinations and testing, implying a desire to avoid new restrictions, and attempted to shift the narrative from rising cases towards the fact that vaccinated individuals are “highly unlikely” to become severely ill. A couple of at-home antiviral pills from Pfizer and Merck received emergency approval from the FDA and multiple studies showed a significant decrease in the risk of hospitalization associated with Omicron. From an economic perspective, the weekly data were mixed. Jobless claims continued to point to a lack of layoffs and consumer confidence rose in December despite Omicron’s emergence. Importantly, core PCE inflation firmed up more than expected. Headline inflation accelerated from 5.1% to 5.7% and core picked up from 4.2% to 4.7%, both the fastest increases since the early 1980s. While personal income and spending rose solidly as expected in November, the rapid price increases chopped the 0.6% nominal spending gain to 0.0% in real terms and the savings rate fell to its lowest level since 2017. Click here to view the full recap.


CORONAVIRUS UPDATE  Vining Sparks Coronavirus Chartbook and Vining Sparks Coronavirus State Charts


TRADING ACTVITY

Stocks Rise and Shorter Treasury Yields Advance to Start Final Week of 2021: Global stocks pushed higher Monday on average, although trading volumes remained depressed with several key markets across both Asia and Europe still closed for the Christmas holiday. U.S. index futures added between 0.2% and 0.4% around 7 a.m. CT to push contracts on the S&P 500 to a new record. Airline stocks were lower in pre-market trading and will be watched throughout Monday’s session after a swath of cancellations over the Christmas weekend. While bad weather was to blame, airlines also blamed a shortage of workers the companies said had come down with the virus. The Treasury curve was flattening to start the final trading week of 2021 with shorter yields moving up as longer yields inched lower. The 2-year Treasury yield had added 2.3 bps to 0.71%, a new cycle-high. The 5-year yield rose 1.3 bps to 1.26% as the 10-year yield dipped 0.2 bps to 1.49%.


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