Daily Market Color

Omicron Arrives in the U.S. Sending Stocks & Yields Lower

News of Omicron case in U.S. sends rates and risk assets tumbling lower. The first case of the Omicron variant was detected today in California, officials confrming that an individual in California tested positive for the nascent strain. While health officials had said for days that the variant was likely already in the United States, the news still send risk assets tumbling lower, the S&P 500 erasing a 1.9% gain to close down 1.2%- one of the largest intraday swings this year. Interest rate markets continued to be volatile, the 10-year Treasury yield climbing as much as 6 bps before gapping lower on the news of the Omicron case, ultimately closing 4 bps lower at 1.40%.

U.S. companies added 534,000 employees to payrolls in November, beating analyst estimates of 525,000. The ADP reported businesses continued to increase payrolls at a healthy pace in November, though total employment is still well below pre-pandemic levels. The service industry led the increase in November, which added 424,000 jobs primarily driven by hospitality and leisure. Tomorrow, U.S. initial jobless claims will be released with analysts expecting an increase after last week’s print hit a five-decade low. Friday, the federal government will release the November jobs report, with analysts expecting an increase of 548,000 jobs in November.

According to the Fed’s Beige Book, prices increases were “moderate to robust” as price hikes were “widespread” in November. Economic activity was “modest to moderate” in most of the Fed’s twelve districts through November. Some districts noted “increased uncertainty” for near-term economic activity due to supply-chain disruptions and labor shortages. The report also commented that leisure and hospitality activity picked up in most districts as the Delta variant became less of a threat, but the emergence of the Omicron variant was unknown at the time.

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