U.S. stocks finished higher on Friday, 10th December 2021, to close out one of the best weeks since February.
Investors shrugged off the consumer price index (CPI) report that showed inflation has rose in November by 6.8%, the most since 1982, although just below the feared mark of 7%.
U.S. consumer sentiment rose in early December by more than forecast, on an improved economic outlook. The University of Michigan’s preliminary sentiment index increased to 70.4 from a decade-low to 67.4 in November, according to data released on Friday. The figure exceeded the median estimate of 68 in a Bloomberg survey of economists.
During this interval, the S&P 500 gained 1% and Nasdaq 100 added 1.1%.
For the week, the Dow was up by 4%, the S&P 500 Index gained 3.8% and the Nasdaq rose by 3.6%. The Dow recorded its biggest weekly percentage gain since March, while the S&P 500 Index and Nasdaq each had their largest weekly percentage gain since February.
Here are the closing levels on Friday: –
What a difference a week makes. Last week, we were looking at the market potentially falling into correction territory and now we are aiming to make new highs.
It was right for us not to discount the dip buyers who have been right more often than wrong,
so much so that by one measure the strategy is having one of its best years on record.
We were also right to discount the virus and the Fed’s hawkish stance as an anomaly. The markets digested the news and are happy to go back to risk-on mode.
Hedge funds, which cut equity exposure at a ferocious pace during the November rout, re-emerged as buyers. With his, equity funds lured money for an 11th straight week as bullishness crept higher in the options market.
The Federal Reserve will be meeting this week. Traders will be watching the dot plots for 2022 and 2023, as well as looking for how the Omicron risk, factors into the rate and tapering equations.
Other economic calendar events to watch next week include reports on producer price inflation, retail sales, and industrial production.
With the latest moves in the market, it is probably going to be grinding higher till the end of the year.
All we have to do is to watch out for the year-end book closing or the profit taking that may nudge prices lower.
Source: CBOE, Reuters, Bloomberg
This commentary is written by James Gomes
James has been in the finance industry for over 30 years and most recently worked for a large U.S. bank for more than 20 years.
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