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Weekly Updates

S&P 500 in the Red to Start 2022, After a Stellar 2021

Weekly Update – January 07, 2022

  • The S&P 500 index started the new year in the red, falling 1.9% in the first week of 2022, even as the energy sector jumped 11%.
  • The S&P 500 ended Friday’s session at 4,677.03, down from last Friday’s closing level of 4,766.18. The index rose in its first trading session of the new year and hit a fresh intraday high on Tuesday but closed lower in each of the last four sessions.
  • The rocky start to the year follows a 2021 in which the S&P 500 climbed 27%. The market benchmark is now up 22% from its year-ago level.
  • The gains over the past year came amid the authorizations of COVID-19 vaccines and treatments while the US economy has been recovering from 2020’s pandemic-related closures. However, as the highly contagious omicron variant has prompted record daily COVID-19 case levels in the US in recent days, leading to staffing issues across industries, investors have seen that the virus still has the ability to disrupt business.
  • December jobs data released Friday by the Labor Department showed last month had the smallest monthly jobs gain since December 2020. The increase in nonfarm payrolls for December amounted to 199,000, about half of the amount expected according to the Econoday consensus. This followed an increase of 249,000 in November, which was revised up by 39,000 jobs.
  • Still, December’s unemployment rate fell to 3.9%, the lowest level since February 2020, from 4.2% in November, and surpassed expectations for a 4.1% rate. The larger-than-expected drop in the unemployment rate pushed market bets higher that the Federal Reserve’s Federal Open Market Committee will raise interest rates in March. Minutes released last week from last month’s FOMC meeting showed some participants suggested rate increases may begin sooner and at a faster pace than previously expected.
  • The real estate sector had the largest percentage drop of the week, down 4.9%, followed by a 4.7% decline in technology and a 4.6% drop in health care. Other sectors in the red included communication services, consumer discretionary and utilities.
  • However, there were still four sectors in the black, led by an 11% surge in energy and a 5.4% climb in financials. The other gainers were industrials and consumer staples.
  • The real estate sector’s decliners included shares of Crown Castle International (CCI), which fell 6.7% as JPMorgan Chase downgraded its investment rating on the real estate investment trust’s stock to neutral from overweight.
  • In technology, shares of Enphase Energy (ENPH) shed 21% as the supplier of micro inverter-based solar and battery systems said it completed its previously announced acquisition of ClipperCreek, a provider of electric vehicle charging stations. BofA Securities downgraded its investment rating on Enphase’s stock to neutral from buy while cutting its price target on the stock to $187 from $297.
  • In health care, shares of Biogen (BIIB) slipped 3.1% as the biotechnology company said it exercised its option to obtain from Ionis Pharmaceuticals (IONS) a worldwide, exclusive, royalty-bearing license to develop and commercialize BIIB115/ION306 to treat spinal muscular atrophy. As a part of the option exercise, Biogen made a one-time $60 million payment to Ionis in Q4 of 2021. Future payments may include potential post-licensing development, regulatory and commercial milestone payments, and royalties on annual worldwide revenue.
  • On the upside, the energy sector’s climb came as crude oil futures jumped amid unrest in Kazakhstan, which is a member of the OPEC+ alliance. Among the sector’s gainers, shares of Schlumberger (SLB) rose 17% while Halliburton added 14%.
  • Next week, economic data on tap include the release of the December consumer price index on Wednesday, the December producer price index on Thursday, and December retail sales, import prices and industrial production on Friday.
  • The Q4 earnings season will also kick off toward the end of next week, with Delta Air Lines (DAL) expected to release its Q4 financial results on Thursday, followed by reports from Wells Fargo (WFC), JPMorgan Chase (JPM) and Citigroup (C) on Friday.
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