The U.S. Economy Created 210,000 Jobs in November… The unemployment rate dipped to 4.2%, a pandemic low.
What it means—The jobs report showed the worst of both worlds. The consensus estimate was for 550,000 jobs. The actual figure showed that we added few jobs in the leisure and hospitality sector, which should be a drag on the economy. This might give central bankers a reason to stick to their bond tapering schedule, but the unemployment rate fell more than expected, which could give the Fed a reason to tighten monetary policy a bit faster. Friday’s news sparked sharp selling in the tech sector, as investors moved to protect gains. Buy-the-dip investors bought tech stocks on Monday but not enough to reverse the existing down trend. Tech investors aren’t worried about the overvaluation risk identified in the Buffett Valuation formula.
Omicron Variant Concern Drives Markets Lower… Word of the COVID variant spread over Thanksgiving Day, which drove down the markets on Friday.
What it means—That’s not the normal meaning given to the term “Black Friday.” Friday is often a light trading day which turned into a rout, as the few people at their desks wondered what a variant with 30 to 50 mutations would mean for efficacy of the existing vaccines, transmission rates, and likelihood of adverse outcomes.
As more news came out over the weekend, investors breathed a sigh of relief and pushed the markets higher on Monday. We don’t have definitive answers on the variant yet, although preliminary information shows it is more transmissible but results in milder infections. We must wait on data to know for sure and to see how effective the current vaccines are at protecting people against the variant.
While Monday’s stock indices moved upward, within the broad base of stocks with momentum falling issues were three times greater.
Powell Tells Congress the Fed Might Taper Faster… In his regular congressional appearance, Fed Chair Powell said that high inflation is a problem and could drive the bankers to cut their bond purchases faster than the current schedule so that they could raise interest rates sooner.
What it means—Powell also said the bankers will stop using the word transitory because it means different things to different people. His words on tapering faster caught the markets by surprise on Tuesday and sparked a sustained selloff, as investors hurried to protect 2021 gains ahead of tighter monetary policy. So far, none of this has pushed interest rates higher. The 10-year yield sits just under 1.5%, but that shouldn’t last. If the Fed follows through with a faster tapering schedule at its next meeting mid-December, then we should expect higher short-term rates by next summer. This should drive rates higher and take a little pressure off leveraged markets such as real estate.
Omicron Scare Punishes Oil Prices… From Wednesday, November 25, to Monday, November 30, oil prices fell more than 15%, as investors worried about the new COVID variant disrupting the global economy.
What it means—Omicron did what President Biden couldn’t: it brought down the price of oil… at least for a few days. Weeks ago, Biden authorized releasing 50 million barrels of oil from the strategic petroleum reserve (SPR), selling 18 million barrels outright and offering 32 million on exchange, which means whoever takes the oil must replace it later, with interest. Biden coordinated the move with officials from other nations, who also announced releases from their strategic reserves, but investors didn’t care; they bid up the price of oil after the announcements. Omicron changed that. As word of the variant spread, oil prices plummeted, reflecting worries about falling demand which are easing. The comparison shows that we need much greater visibility on rising supply to meet demand than a modest release from the SPR can provide. More exploration and production by major oil companies would do the trick, but that’s not likely.
Man Recovering From Heart Surgery Receives Lottery Ticket in Get Well Card, Wins $1 Million… Alexander McLeish of Attleborough, Massachusetts, must feel pretty lucky. While recovering from heart surgery, he received a get-well card that included a few scratch-off lottery tickets from a friend. One of those tickets netted him $1 million. The same friend gave McLeish a lottery ticket as a birthday gift years earlier that earned him $1,000. Maybe it’s not McLeish that’s lucky; maybe it’s the friend.