The Market Today

Initial Analyses of Omicron Show High Transmission but Potentially Lower Severity


by Craig Dismuke, Dudley Carter

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

Data from South Africa have been used by scientists to determine some mixed initial analyses. Initial estimates of transmissibility are concerningly high.  However, initial analyses of cases show severity of infections as meaningfully less than previous waves.

 

TODAY’S CALENDAR

There are no economic reports on today’s calendar.


OTHER ECONOMIC NEWS

ICYMI – December 3, 2021 Weekly Market Recap: Market volatility since the emergence of the Omicron variant on Thanksgiving continued last week as Fed Chair Powell publicly supported accelerating the tapering process and November’s jobs report caused some confusion about the trajectory of the labor market. The uncertainty the new variant poses for the health and economic outlooks remained of top concern early last week. However, Omicron was forced to share the spotlight from Tuesday with growing angst about the future of Fed policy. Chair Powell told a Senate committee that he supported accelerating the tapering process to provide optionality on rate increases earlier in 2022 amid persistently strong inflation. Several other Fed officials later said they too supported a faster taper. Not surprisingly, November’s nonfarm payroll data was the focus of a hefty economic calendar. The report was somewhat confounding, as the two underlying reports painted drastically different pictures of hiring during the month; the popular nonfarm payroll tally was much weaker than hiring in the household report. Looking for other current employment indicators to triangulate the signal, jobless claims remained strong and both ISM reports, which topped expectations, included positive employment prints. Elsewhere in the payroll data, unemployment continued its rapid decline despite a welcomed rise in participation and wage growth remained firm, albeit less strong than expected. With investors anxious about a more aggressive Fed amid heightened economic uncertainty, Treasury yields tumbled and the curve flattened. After steepening Monday, the spread between the 2-year and 10-year yields collapsed 26 bps from Tuesday to Friday, the sharpest four-day decline since November 2011. The 75.0-bps spread marked the least slope since November 2020. Click here to view the full recap.


TRADING ACTVITY

Most Markets Attempt a Reversal of Friday’s Risk-Off Rip: Last week’s focus on market volatility remained prevalent in weekend market commentary as Bitcoin tumbled sharply Saturday. Additionally, shares of global tech companies remain weak Monday, leading to broader declines for Asian equity indices and pre-market losses for Nasdaq futures. Other markets, however, have attempted to reverse some of last week’s risk-off moves. European equities rallied and futures tracking the Dow and S&P 500 were higher by 0.6% and 0.3%, respectively. Oil prices had recovered nearly 3% and Treasury yields were higher and steeper. The 2-year yield had added 3.6 bps to 0.62% while the 10-year yield rose 4.6 bps to 1.39%, steepening the curve for the first time since Monday. European yields were more subdued, however, and uncertainty about the economic impact of the Omicron variant and the future Fed policy remained elevated. In Europe, cases had already reached their worst levels of the pandemic even before Omicron was identified publicly, leading governments to implement new restrictions. Data Monday showed a sharp contraction of orders from German factories in October and the weakest reading of confidence among European investors in eight months.


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