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Dow Jones Limps into the Close as Equity Lull Continues

Dow Jones, Inflation, Covid, Federal Reserve – Talking Points

  • Dow Jones sheds 500 points as financials drag major benchmarks lower
  • NY State reports fresh record of Covid cases as contagion fears return
  • Hawkish policy pivots from key central banks continue to weigh on markets

The Dow retreated tumbled by 500 points on Friday to wind down a week of volatility and key central bank events. Friday’s decline saw the Dow post a 1.7% loss for the week, far from the nearly 3% weekly decline seen in the Nasdaq 100 Index. Bank stocks reversed course from Thursday, leading the Dow and S&P 500 lower. Dow constituents Goldman Sachs and JP Morgan lost 3.9% and 2.3%, respectively.

Market participants spent the week processing major central bank policy decisions, with a rotation from mega-cap tech to more cyclical stocks the dominant theme of the week. The theme of value outperforming in the near term may continue as markets ponder more hawkish central banks and upcoming rate hikes.

Along with a shifting tone from G10 central banks, market participants are having to digest the latest developments surrounding the Omicron variant. On Friday, New York State set a new pandemic record for daily cases of Covid, with the tally of 21.027 surpassing the record of 19,942 set back in January. New York is not the only location challenged by the new variant, as the UK reported 93,000 new cases.

Dow Jones Daily Chart

Dow Jones Limps into the Close as Equity Lull Continues

Chart created with TradingView

The potential remains that lockdowns could return to daily life. Implementation of lockdowns and travel restrictions could hamper the global recovery, which at this point remains robust yet uneven. While Friday session saw the final “quadruple witching” day of the year pass, traders may be in for periodical bouts of volatility through the new year. Historically the holiday trading period sees volume trail off into the turn of the year, which could bring about sudden and sharp swings across asset classes.

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— Written by Brendan Fagan, Intern

To contact Brendan, use the comments section below or @BrendanFaganFX on Twitter

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