The Week that Was: January 3 to January 7

Kevin Davitt
January 10, 2022

A concise weekly overview of the U.S. equities and derivatives markets

Last week (January 3 – January 7), fixed income markets slid alongside U.S. equities. The Nasdaq Composite suffered its worst weekly performance since February 2020. Higher rates are weighing more heavily on growth companies as futures earnings are discounted. Information Technology and Healthcare were the worst performing sectors in the S&P 500 Index. Energy and Financials fared far better against the backdrop of higher interest rates and inflationary pressures. WTI Crude Oil moved back toward $80 per barrel after falling to approximately $62 at the beginning of December.

The Nasdaq Biotech Index declined by nearly 6% last week, hitting the lowest levels since November 2020. The index includes Amgen, Gilead, Moderna, Regeneron, Vertex and other well-known pharmaceutical and biotech companies.

The December jobs data was also a disappointment. The headline number came in well short of expectations, adding 199,000 jobs compared to the forecasted 400,000. Average hourly earnings continued to increase, gaining 4.7% year-over-year. The labor market remains tight as a record 4.5 million Americans quit their jobs during the past month. The unemployment rate fell back to 3.9% with no increase in labor force participation. This week’s Consumer Price Index (CPI) and Producer Price Index (PPI) data will be analyzed for further signs of inflation.

Quick Bites


  • U.S. Equity Indices declined across the board. 
  • S&P 500 Index (SPX®): Decreased 1.9% week-over-week. The index’s top five constituents all fell by at least 2.5%.
  • Nasdaq 100 Index (NDX): Decreased 4.5% week-over-week.
  • Russell 2000 Index (RUT℠): Decreased 3.0%. week-over-week.
  • Cboe Volatility Index (VIX™ Index): Remained relatively rangebound and ended the week at 18.76.


  • SPX options average daily volume (ADV) was 1.48 million contracts per day, above the previous week’s average of 1.26 million contracts per day. The one-week at-the-money (ATM) SPX options straddle (4680 strike with an 1/14 expiration) implies a +/- range of about 1.52%.
  • VIX options ADV was about 380,000 contracts last week, which was higher than the previous week’s ADV of 280,000 contracts. The VIX options call-put ratio was 1.35:1.
  • RUT options ADV was 50,000 contracts, up from the previous week’s ADV of 33,700.

Across the Pond

  • The Euro STOXX 50 Index increased 0.7%.
  • The MSCI EAFE Index (MXEA℠) decreased 0.5% and the MSCI Emerging Markets Index (MXEF℠) decreased 0.35% week-over-week.

Charting It Out

Observations on VIX futures term structure

  • The VIX Index increased by 1.54 on the week and closed at 18.76. The weekly high measure was 21.06 and the low was 16.34.
  • The January (standard) VIX futures traded in a 3.25-handle range.
  • The VIX futures remain in contango but flattened slightly. The Month-1/Month-2 spread moved from 2.30 wide on December 31 to settle at 1.70 on January 7. 
  • January VIX futures (Month-1) climbed 0.75 points last week and the February VIX futures (Month-2) added 0.15.

Source: LiveVol Pro

Macro Movers

  • The 30-year U.S. Treasury yield closed at 2.12%, higher by 20 basis points. The 10-year U.S. Treasury yield moved to new two-year highs (above pre-pandemic levels) to 1.77%. The 2-year U.S. Treasury yield moved from 74 basis points, up to 87 basis points.
  • The meeting minutes from the last Federal Open Market Committee (FOMC) meeting indicated the Fed’s willingness to withdraw monthly asset purchases quickly and signaled the potential for rate hikes in 2022, as well as a reduction in its balance sheet. Time will tell if the Fed ultimately allows assets to roll off or if it hastens the process by selling bonds.
  • The S&P GSCI gained 3.0% last week. Natural Gas and Crude Oil both jumped by 5%. Silver declined by 4.2% and Gold dropped by 1.85%.
  • The U.S. Dollar Index (DXY) moved higher following the release of the FOMC minutes but weakened after the monthly jobs data report.
  • Big Tech was red across the board as growth names were sold and interest rates increased.
  • Higher rates tend to put pressure on earnings growth. Tech companies are growth focused, so the prospect of higher rates makes them relatively more expensive.

Major Cryptos


  • Last week Bitcoin (BTC) traded between $48,000 and $40,500. The cryptocurrency market sold off midweek and continued to decline.
  • The last significant BTC drawdown in September 2021 found support around $40,000. BTC ended the week around $41,700, down 9.5% week-over-week.


  • Ethereum (ETH) prices followed a similar pattern to Bitcoin. ETH ranged between $3,900 and $3,000 last week and ended the week around $3,200, down 13%. 

Digital Asset Industry

  • The total cryptocurrency market cap reached $2.9 trillion two months ago. Since then, the overall market has lost $1 trillion in value, a 34.5% decline.
  • Last week, GameStop (GME) announced that it is developing a marketplace for non-fungible tokens (NFTs).
  • Kazakhstan is home to a significant amount of cryptocurrency mining (behind only the U.S) and has benefited from China’s crackdown on cryptocurrencies.
  • New York and Miami continue to court cryptocurrency and blockchain start-ups.


  • The 7-day average COVID-19 infection rate in the U.S. continued to climb last week. The average moved from approximately 380,000 cases per day to approximately 611,000 on January 7. On January 3 there were more than one million new cases. 
  • 62% of the U.S. population is fully vaccinated against COVID-19 and 74% have received at least one dose of a COVID-19 vaccine. For just those 12 years and older, the numbers are 71% and 84% respectively.
  • Areas across the country are struggling with higher caseloads. Rates are the highest in the tri-state area but warmer areas like Florida and Puerto Rico have recently seen significant spikes as well.
  • Globally, the 7-day average has grown exponentially. The average moved from approximately 1.3 million on December 31 to approximately 1.97 million on January 7.
  • Israel is now offering a fourth COVID-19 vaccine dose to those over 60. Early data indicates that the Omicron variant may not impact the lungs like previous versions of the virus, including Delta.

Source: The New York Times

Tidbits from the News

  • On Friday, the Bureau of Labor Statistics reported that 199,000 jobs were added in December. Median estimates forecasted 400,000 in gains. The November data was revised higher by 39,000 jobs. The chart below plots the job losses and gains in the U.S. since February 2020. The U.S. economy remains 3.6 million jobs shy of the 152.5 million mark reached just prior to the pandemic.

Cumulative Change in Jobs Since Before the Pandemic

Source: Bureau of Labor Statistics and The New York Times

  • The number of credit cards in circulation has increased slightly over the past two decades, however more and more, younger consumers are choosing the “Buy Now, Pay Later” (BNPL) option for larger purchases. Gen Z and Millennials have readily adopted this approach while older consumers have been more reluctant, sticking to credit cards.

Buy Now, Pay Later Versus Credit Card Usage in the U.S.

Source: G.P. Bullhound

  • The Federal Reserve’s balance sheet has been expanding for the better part of the past 13 years. The pandemic response (increased asset purchases) nearly doubled the size of the Fed’s total assets. This trend almost certainly bolstered U.S. equity markets and has kept interest rates at or near historic lows. The Fed’s balance sheet may shrink in the coming year, perhaps more quickly than some anticipated.

U.S. Total Assets Held by All Federal Reserve Banks

Source: Federal Reserve Banks and Compound Advisors

The Week Ahead

Data to be released this week: Wholesale Inventories on Monday; Small Business Index on Tuesday Consumer Price Index (CPI), Federal Budget and Beige Book on Wednesday; Initial Jobless Claims and Producer Price Index (PPI) on Thursday; Retail Sales and University of Michigan Consumer Confidence Index on Friday.

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