In the coming week, it’s back to work with a packed economic calendar to kick off the new year, including the always-important monthly jobs report.
Following a stellar 2021, stocks enter 2022 with a tailwind. Still, the market’s direction in the new year will be determined more by solid earnings growth and a strong economy than by a super easy Federal Reserve.
In a banner year, the S&P 500 rose 27 percent to 4,766 and set 70 new closing highs. The benchmark outperformed the Dow Jones Industrial Average’s 19% gain and the Nasdaq Composite’s 21% gain.
With Monday’s opening bell, the clock starts ticking on a quarter that could see the Fed raise interest rates for the first time since 2018. The employment report is the most critical data on a calendar that includes the ISM manufacturing survey and auto sales data scheduled for Tuesday. Thursday marks the release of international trade data.
According to Dow Jones, economists expect 405,000 new jobs in the final month of 2021, up from 210,000 in November. The unemployment rate expects to fall from 4.2 percent to 4.1 percent this year.
The 2021 market divides by an initial surge in some high-flying growth stocks, but many of those names fell hard, while some of the S&P 500’s big-cap names turned in supercharged performances.
Microsoft increased by 51% year on year, while Apple increased by 34%. Home Depot increased by 56%, while American Express increased by 35%. Ford’s stock was up 136%.
In 2020, the ARK Innovation ETF, a high-flying collection of growth stocks, was down 24% for the year.
The minutes of the Fed’s December meeting will be released. Following that meeting, the Fed announced that it would accelerate the tapering of its once-monthly bond-buying program, which would now end in March rather than June. The March meeting is now the Fed’s first opportunity to move on a rate hike. The Fed predicts three in 2022.
Strategists predict that the stock market will be more volatile in 2022, as the Fed ends its bond purchases and begins to raise interest rates from zero. Stock strategists have a median target price of 5,050 for the S&P 500.
The energy was the top performer among the major sectors in 2021, increasing by 48 percent, the highest increase ever.
The Consumer Staples Select Sector SPDR Fund outperformed technology and semiconductors in December. The fund gained nearly 10% for the month, while the Technology Select Sector SPDR Fund gained 3%.