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End of Day Brief - Wednesday Dec 1 - Markets down on Covid/Fed fears

SP 5004513.04-53.96(-1.18%)
10-yr Note +3/321.420
NYSEAdv 912 Dec 2365 Vol 1.1 bln
NasdaqAdv 1014 Dec 3302 Vol 6.2 bln

Industry Watch

Strong: Utilities
Weak: Consumer Discretionary, Communication Services, Information Technology

Moving the Market

-- Stocks close sharply lower as early momentum fades and the first case of the Omicron variant in the U.S. is detected

-- (CRM) fell nearly 12.0% on disappointing guidance

-- Growth stocks paced the retreat

Stocks sharply lower on virus fears and Fed fears

Dow -461.68 at 34022.04, Nasdaq -283.64 at 15254.07, S&P -53.96 at 4513.04

[BRIEFING.COM] The S&P 500 fell 1.2% on Wednesday after being up 1.9% intraday, as momentum faded and news of the first reported case of the Omicron variant in the U.S. weighed on sentiment. Stocks closed at session lows amid a wave of selling interest in the final minutes of the session.

The Dow Jones Industrial Average fell 1.3%, the Nasdaq Composite fell 1.8%, and Russell 2000 lost 2.3%.

The major indices were up as much as 1.5-2.5% intraday, purportedly as concerns about the Omicron variant and the Fed's policy course were set aside and investors put new money to work on the first day of the month. There were suspicions, though, if the market's rally had a firm foundation for sustained gains given the recent volatility.

All 11 S&P 500 sectors were trading higher, but only one escaped with a gain. The consumer discretionary (-1.9%) and communication services (-2.0%) sectors led the retreat with 2% declines, while the utilities sector (+0.2%) managed to close higher.

High-beta growth stocks were among the weakest performers, receiving little support from a decline in long-term interest rates. The 10-yr yield declined one basis point to 1.43% after hitting 1.50% overnight.

The ARK Innovation ETF ($ARKK 98.60, -7.09, -6.7%), which contains many high-growth story stocks, fell 6.7% as investors shied away from riskier equities. Dow component ($CRM 251.50, -33.46, -11.7%) struggled all session and closed lower by 11.7% after providing disappointing guidance.

Value stocks outperformed on a relative basis, but it probably wasn't because of the better-than-expected November ADP Employment Change report and ISM Manufacturing Index since cyclical stocks struggled. Instead, many of the defensive value stocks in the health care and consumer staples industries did okay today.

The 2-yr yield rose four basis points to 0.56% as the market continued to signal expectations for the Fed to tighten policy more quickly. The U.S. Dollar Index increased 0.1% to 96.08. WTI crude futures fell 0.8%, or $0.53, to $65.61/BBL after being up more than 4.0% early in the session.

Reviewing Wednesday's economic data:

  • The November ISM Manufacturing Index checked in at 61.1% ( consensus 61.0%), up slightly from 60.8% in October. A number above 50.0% is indicative of expansion. November marked the 18th straight month of expansion for the manufacturing sector.
    • The key takeaway from the report is that manufacturing activity is still running at a good clip despite supply chain, transportation, and labor constraints; meanwhile, it was noted that manufacturers' sentiment remains strongly optimistic.
  • Total construction spending increased 0.2% month-over-month in October ( consensus +0.4%) following a downwardly revised 0.1% decline (from 0.0%) in September. Total private construction declined 0.2% month-over-month while total public construction spending increased 1.8%.
    • The key takeaway from the report is the decline seen in new single family and multifamily construction. That is most likely the consequence of ongoing supply chain pressures, labor constraints, and higher costs for builders that are standing in the way of building more affordable homes.
  • The ADP Employment Change report estimated 534,000 jobs were added to private-sector payrolls in November ( consensus 515,000). The increase in October was downwardly revised to 570,000 from 571,000.
  • The final IHS Market Manufacturing PMI for November checked in at 58.3, down from 59.1 in the preliminary reading.
  • The weekly MBA Mortgage Applications Index fell 7.2% following a 1.8% increase in the prior week.

Looking ahead, investors will receive the weekly Initial and Continuing Claims report on Thursday.

  • S&P 500 +20.2% YTD
  • Nasdaq Composite +18.4% YTD
  • Dow Jones Industrial Average +11.2% YTD
  • Russell 2000 +8.7% YTD

Source: (

Disclosure: I may trade in the ticker symbols mentioned, both long or short. My articles represent my personal opinion and analysis and should not be taken as investment advice. Readers should do their own research before making decisions to buy or sell securities. Trading and investing include risks, including loss of principal.

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