US stocks were off to a good start in December as traders became both optimistic that Omicron would not lead to a more severe illness than the Delta variant and viewed Powell’s hawkish twist as more of a shift to the center. Equities pared gains after South Africa COVID cases nearly doubled since Tuesday and after their infectious disease official Richard Lessells noted it is too early to say Omicron only causes mild cases. The next couple of weeks will likely see risk appetite take a cue from incremental Omicron updates, supply chain issues, and every inflation reading. A second day of Powell at Capitol Hill saw him stick to his faster taper talk and uncertainty over when will inflation come down.
Stocks gave up most of their gains after the US confirmed its first case of the Omicron variant. We’ve seen this movie before and Wall Street will likely remain COVID variant headline driven until a clear assessment over this wave can be made.
The ADP private payroll report showed 534,000 jobs were created in November, a beat of the 525,000 estimate, but lower than the 570,000 prior reading. Leisure and hospitality jobs were over 30% of the positions added to the service sector, but that rebound could be in jeopardy if Omicron continues to increase.
The ISM manufacturing report was somewhat positive, but nothing to brag about as the headline index rose marginally from 60.8 to 61.1 and as both new orders and employment posted modest increases. Supply chain issues appear to be improving, but orders are still below their recent highs.
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