Daily Market Color

COVID Strikes Back

Omicron wrests spotlight from central bankers, sparking feelings of déjà vu for many New Yorkers. The Omicron variant continues to rapidly spread, particularly in New York City where daily cases crested 20,000 for the first time since the onset of the pandemic. For now, the market appears to have shrugged off any serious economic implications from the variant, Fed Funds Futures still pricing in nearly three 0.25% rate hikes in 2022. Swap rates and Treasury yields would ultimately flatten on the day, 2-year rates rising nearly 2bps while 10-year rates were little changed. Risk assets sold off, but the VIX or “Fear Index” remained little changed at a subdued 21 level.

Week Ahead. After a busy week of economic data and central bank announcements, next week will be light on data for the shortened holiday week. Next Thursday markets will get updated data on consumer confidence, consumer inflation expectations, and new home sales. November Personal Consumption Expenditure (PCE), the Fed’s preferred gauge of inflation, will also be released on Thursday with analysts expecting a year-over-year increase of 5.7%. The markets will be closed next Friday for the Christmas holiday.

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