Stocks closed lower yesterday on renewed variant concerns and inflation concerns.

While the jury is still out on the severity of the Omicron variant, the belief at the moment is that the vaccines should provide some protection. Although, Moderna's CEO said that the current vaccines will likely be less effective. However, Pfizer and BioNTech have said that if adjustments are needed to combat the new strain, they were confident they could create a new one within 6 weeks and make/ship it out within 100 days.

Nonetheless, Fed Chair Jerome Powell, in testimony before the Senate Banking Committee yesterday, said that the new variant poses downside risk to the economy in that it could "reduce people's willingness to work in person, which would slow progress in the labor market and intensify supply-chain disruptions."

That, of course, could exacerbate inflation. In fact, he said it was time the Fed retired the word 'transitory' when referring to inflation, saying that it's likely to remain elevated into mid-2022 before finally cooling down.

As such, he hinted that the Fed could accelerate their tapering pace. At the present pace of -$15 billion less per month, that would see the Fed fully unwind their quantitative easing by mid-June. But an acceleration could pull that timeline forward. By how much, nobody knows. But the June end date no longer looks like the finish line.

All of the above weighed on stocks.

In other news, the Redbook report showed same store retail sales up 16.9% y/y vs. last month's snapshot of 15.3%.

The Case-Shiller Home Price Index gained 0.8% m/m (unadjusted), for a 19.1% y/y pace. That's down from last month's 19.6%, but still a solid gain.

And Consumer Confidence came in at 109.5. That too is down from last month, which came in at 111.6. (No doubt those numbers were hampered by both inflation and covid concerns.)

But the economy continues to impress. And full-year GDP is still expected to come in at the fastest pace in 37 years, with robust growth outlooks for 2022 and 2023.

We now have 1 month left in the year (4 weeks and 3 trading days to be exact).

While volatility looks here to stay, December is typically a strong month for stocks.

So we could see a strong finish to 2021.

See you tomorrow,