It was a volatile week but a Friday rally pushed the Dow 30 industrials, the S&P 500, and the NASDAQ positive for the week.  The Russell 2000 small cap index and international indices ended the week lower.

The International Monetary Fund lowered expectations for global growth in 2022.  Still, the IMF forecasted 4.4% global growth.  They forecasted 4.0% in the U.S. down from 5.6% forecast in October.

The Federal Reserve met and signaled that they would raise short term rates in March.  Speculations abounded that the first increase may be ½%.

U.S. gross domestic product grew sharply in the fourth quarter as Delta cases declined.  It is expected that Q1 2022 growth will be slower due to Omicron.

Concerns over the Russian buildup of troops near the Ukraine border continued despite diplomatic talks.  Europe particularly is vulnerable to a cutoff of Russian natural gas.  While the U.S. has over a dozen ships of LNG enroute to Europe and another 33 ships likely from other countries, this is not enough to make up for a potential cutoff of Russian gas.  The U.S. export terminals are running near capacity.

Treasury yields rose with the 30-year bond yield at 2.098% and the 10-Year note at 1.792%.  Crude oil rose to $87.16 a barrel and natural gas rose sharply to $4.648 per MMBTUs.  The U.S. dollar index rose sharply to 97.22 and gold fell to $1798.70 an ounce.

In the economic numbers:

• The Commerce Department reported:
  • U.S. gross domestic product grew at a 6.9% annual rate in the fourth quarter up sharply from a 2.3% increase in Q3.
  • Durable goods orders fell 0.9% in December, the first decline in three months.
    • Excluding aircraft and military, durable goods orders were nearly unchanged in December.
    • Aircraft orders fell 14.4%.
    • Motor vehicle orders rose 1.4%.
    • Unfilled orders for durable goods rose 0.5%.
    • November’s durable goods orders were revised up to a 3.2% gain.
  • Consumer inflation adjusted spending fell 0.6% in December.  Part of this may be due to earlier Christmas shopping but also due to Omicron, supply shortages and inflation.
  • The personal consumption expenditure price index rose 0.4% from November and 5.8% from the previous December.  The PCE price index is the FED’s preferred measure of inflation.
  • Core prices, excluding volatile food and energy rose 4.9% from a year ago.
  • Wages and salaries rose 0.7%.
  • The personal saving rate rose to 7.9%.
• The Labor Department reported :
  • Employment costs rose 4.0% in 2021.
  • First time claims for unemployment were 260,000 down from the prior weeks revised 290,000. 
  • The 4-week moving average of claims, designed to smooth out volatility, rose to 231,000 up from the revised 211,000 in the prior week.
  • Continuing claims rose from 1.6MM to 1.7MM in the week ending January 15^th.  
  • For the full unemployment report go here:  https://www.dol.gov/ui/data.pdf .
• The EIA weekly oil report is here: http://ir.eia.gov/wpsr/wpsrsummary.pdf .  Also, the EIA reported in the prior week:
  • Field production of crude oil fell from 11.7MM BPD to 11.6MM BPD.
  • Natural gas storage fell 219BN cubic feet and is at the 5-year average at this time of year.
• Baker Hughes reported the number of active oil rigs rose 4 to 495.  The number of active natural gas rigs was rose 2 to 115.
• Factset reported with 33% of the S&P 500 companies reporting 4^th quarter earnings, the blended earnings increase was 24.3% from a year ago.

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Loren C. Rex, CFP^®, MA                                                                     Erik A Smith, AIF®

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 These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice.  The Indices mentioned are unmanaged and cannot be invested into directly.