News of the omicron variant sent stocks tumbling on Friday, pushing all major equity indices into the red for the week. The Nasdaq was the worst performer, as concerns about rising rates had dented longer-duration growth stocks even before Friday’s move. Small and midcap stocks underperformed large caps, while international stock underperformed the US.
In a classic flight-to-safety trade, US Treasuries rallied as yields fell and the curve flattened. Credit spreads widened, particularly in high yield where bond prices fell in sympathy with equities. Investment grade corporate bonds and high quality munis were close to flat on the week thanks to the offsetting moves in rates and spreads.
Commodity prices plunged on Friday, particularly oil which endured its largest oneday selloff since the early days of the pandemic last year. US benchmark West Texas Intermediate fell more than $10/barrel to close at $68.15, while non-energy commodities were off a more modest ~2% in aggregate. See the Chart of the Week for a time series of oil prices.
Apart from concerns regarding the omicron variant, economic news was mostly positive last week. Initial jobless claims fell below 200k for the first time since the onset of the pandemic, while the University of Michigan Consumer Sentiment index rose slightly more than expected in the final November print.