Ordinarily, many investors would have been focused on the retail sector this week. If we consider Thanksgiving to be the official beginning to the holiday shopping season, this year saw a strong opening. Adobe Analytics reported record-breaking Thanksgiving Day online sales ($5.29 billion, up 2.9% YoY) and strong Black Friday sales as well ($9.12 billion, up 2.3% from 2021.) Electronics, toys, and exercise equipment proved particularly popular. Brick and mortar stores also did well, with the National Retail Federation reporting 122.7 million shoppers – a new record, up 17% from 2021 – flocking to stores between Thanksgiving and Cyber Monday.
But equity and crypto markets around the world opened the week focused on unusually vocal and assertive protests throughout China, led primarily by a cross-section of university students (notably at the elite Tsinghua University, Xi Jinping’s alma mater), urban professionals, and migrant workers unhappy over both China’s seemingly endless lockdowns in its quest for zero COVID and the country’s increasingly strict censorship – especially in response to criticism of the zero-COVID policies. The tipping point appears to have been widely shared (though unconfirmed) reports on social media that 10 deaths from an apartment fire in Urumqi, in Xinjiang province, were partly due to locked or welded-shut exits, which would have impeded both residents trying to escape and firefighters and firefighters trying to put out the blaze. Similar lockdown-enforcement measures have been seen elsewhere in China in recent months.
COVID infections had been setting new records in the Middle Kingdom despite the stringent lockdown, quarantine, and mass-testing policies, though it should be noted that the official rate of new infections has remained quite low compared to wealthy countries that have long since re-opened, such as the United States. Nevertheless, with unrest spreading, some protesters went so far as to call for Xi Jinping to step down, and observers around the world worried about disruptions to the supply chain and about whether the world’s second-largest economy would remain shut down for longer than they had anticipated.
The worries sent equity and crypto markets around the world falling. Monday saw the SPX fall 1.54% and the Nasdaq slid by about the same percentage, at 1.58% down. Meanwhile, crypto mainstays $BTC and $ETH both fell, $BTC by as much as 2.1% and $ETH by as much as 3.8%.
Some of the crypto action on Monday was also attributed to BlockFi filing for Chapter 11 bankruptcy, with BlockFi adviser Mark Renzi admitting that the firm had been caught in what he called the FTX “death spiral.” Renzi was quick to point out that BlockFi did not have the apparent issues with inadequate governance and lax internal controls that featured in the collapse of FTX. Nevertheless, BlockFI has paused customer withdrawals until further notice.
Investors on Tuesday returned to what has become habitual in 2022—trying to use the latest macroeconomic data to divine whether the Fed might become less hawkish on rates. The Conference Board reported on Tuesday that the Consumer Confidence Index fell to 100.2, down from 102.2 last month, with expectations for the short term turning more pessimistic. Meanwhile, the housing market showed more signs of cooling as the 20-city composite of the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index notched a 10.4% year-over-year gain in September, lower than 10.9% expected by analysts. SPX ended the day down 0.16% and the Nasdaq dipped 0.59%.
Wednesday began with employment data from payroll processor ADP showing November hiring coming in at 127,000 new jobs, significantly below both estimates (190,000) and October levels (239,000). ADP said new hiring was led by leisure and hospitality. Those offset declines in new jobs in manufacturing and professional/business services, among others. But trading activity remained muted as investors awaited Fed Chair Jerome Powell’s remarks at the Brookings Institution. Those remarks sent markets rallying, with the SPX up 3.09% and the Nasdaq rocketing up 4.41%. Mr. Powell confirmed hopes that smaller rate hikes were on the table and might materialize as soon as December, though he also reiterated much of the “higher for longer” messaging that Fed officials have been disseminating.
Thursday saw investors express worries about upcoming employment numbers, sending indexes briefly lower before recovering. The S&P 500 ended a touch lower, by 0.09%. The Nasdaq gained 0.13%. One of the more noteworthy movers of the day was Salesforce, which at one point dropped as much as 10% on the double-whammy news of disappointing Q4 guidance and co-CEO Bret Taylor’s surprise resignation.
In an indirect response to the previous weekend’s protests throughout China, the Chinese government on Thursday said it would start to take a “more humane” approach to pandemic response. Vice Premier Sun Chunlun, the official overseeing China’s COVID response, declared that China was entering a “new stage” of pandemic response, citing the “decreasing toxicity” of the Omicron variant and the increasing vaccination rate. City officials in Guangzhou and Shanghai announced the lifting of lockdowns in multiple districts, despite rising cases of infections. Zhengzhou, where lockdown measures have significantly impeded iPhone production– and Apple’s share price – also ended its lockdown.
Friday opened with the markets slipping in response to employment data that showed a stronger-than-expected labor market. The leisure and hospitality industries led the way, followed by health care and social assistance sectors. Overall, the Bureau of Labor Statistics found that the U.S. economy had added 263,000 new non-farm jobs in November, far above expectations of 200,000 (though still slightly down from October’s 284,000 figure (revised)). Average hourly wage also rose above expectations, 0.6% MoM versus 0.3% expected. The indexes clawed back some of their initial losses, with SPX ending down just 0.1% and the Nasdaq cutting initial losses to close down 0.2%.
The potential for a catastrophic rail strike on December 9 briefly reared its ugly head this week, raising fears of renewed supply-chain disruptions, their resulting effects on inflation, and feared national economic losses of as much as $2 billion a day. But in a rare display of bipartisanship, leaders of the House and Senate from both parties emerged from a Tuesday meeting with President Biden unanimously pledging that they would take quick action to prevent the strike—and they did so, quickly passing legislation that would impose the terms of a deal brokered by Mr. Biden in September. The President signed the legislation Friday morning.
The President hosted his first state dinner (a milestone coming unusually late in a Presidency due to lingering COVID concerns), greeting French President Emmanuel Macron and his wife. On the menu: Maine lobster, squash picked from the White House garden, and a discussion of the U.S. Inflation Reduction Act, a piece of American legislation that France views as protectionist. Mr. Biden pledged to work on some of the “glitches” alleged by Mr. Macron, though he was at pains to stress that he made “no apologies” for the Act.
The two leaders also showed a united front on the war in Ukraine, reiterating allied commitment to support Ukraine but also a willingness to talk to Vladimir Putin if (and only if) he convincingly indicated he was “looking for a way to end the war.” France’s current occupant of the Elysée Palace also toured New Orleans during his U.S. visit.
Finally, Jiang Zemin has died at age 96. Mr. Jiang led China for more than a decade as it modernized and entered the World Trade Organization, paving the way for his country’s full emergence as the economic and manufacturing powerhouse it is today.