Market week: Stocks start year in the red
Hawkish Fed tone spooks investors
The major U.S. stock indexes struggled to stay above water in the year’s first week of trading. The U.S. jobs report for December underwhelmed, with 199,000 new jobs created in the month, far below earlier street estimates of 440,000. The spread of the Covid-19 omicron variant is thought to have impacted job creation in the month, while the unemployment down at 3.9% and a 0.6% month-over-month rise in wages reflects a continuing labor shortage. But mainly, investors seemed to turn tail on the hawkish tone of the minutes from the U.S. Federal Reserve Board’s last Federal Open Market Committee meeting, which suggested both and earlier-than-expected rate hike followed by a reduction in the Fed’s balance sheet, a combination which in the past has resulted in some cooling off of stock market performance. The benchmark 10-year U.S. Treasury note, as you might expect, sold off through the week, pushing its yield to 1.767% by Friday from 1.51% a week ago.
In Canada, the labor market added 55,000 new jobs in December, about double street estimates, while the unemployment rate ticked down to 5.9% in December from 6.0% in November.
The S&P 500 Composite Index booked a weekly loss of 1.9% to start the year, while the Nasdaq Composite Index plunged 4.5%, as technology and healthcare stocks (and most growth stocks) came under intense selling pressure after the FOMC minutes were released. Toronto’s S&P/TSX Composite Index retreated 0.7% on the week, led by information technology and materials stocks, even as the price of crude oil rose 5.0%. Gold remained rangebound, and closed the week down 1.8%.
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