**Daily Market Recap:**
• Stocks attempted to rebound today, but major indexes gave up their morning gains and closed lower. The Nasdaq once again led the losses after falling into correction territory yesterday, declining more than 10% from the November highs. The one bright spot in today’s trading was international markets, which so far this year have outperformed U.S. equities. Asian stocks soared overnight on news that the Chinese authorities cut key interest rates, a step towards further easing to bolster growth. The 10-year Treasury yield was little changed at 1.83%.
• Today’s economic data surprised mostly to the downside, weighing some on sentiment. Jobless claims climbed to a three-month high, suggesting that the surge of the omicron variant is having an impact on the labor market. We expect some weakness in the January and first-quarter data as a result of the ongoing pandemic disruptions. However, the soft patch is likely to prove temporary, in our view, with activity picking back up in the second quarter. On the housing front, December home sales dropped 4.6%, as inventory remains low and mortgage rates have risen some. Prices continue to rise at a fast pace, 15.8% in December, raising affordability concerns.
• The latest bout of volatility is tied to a sharp rise in bond yields, as the Fed has pivoted amid inflation pressures. The speed in which yields have climbed has triggered a rotation away from pricey growth-style investments toward the more reasonably priced value investments. Because technology stocks carry an outsized weight in major indexes, valuation concerns have triggered a pullback in U.S. large-cap stocks. We think that the upcoming 2022 Fed hikes won’t choke off the economy, which typically happens at the tail end of the tightening cycle, not the beginning. Therefore, we view this Fed-induced pullback as an opportunity to add quality investments at potentially lower prices.

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