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Deteriorating investor enthusiasm for high-valuation growth companies and a mixed start to the fourth-quarter earnings season made for a volatile week.

The perception of a more hawkish Fed put a hard stop to the year’s positive start and pushed bond yields higher and stocks into a broad retreat.

Stocks closed out the year on a mostly positive note, adding to the year’s gains as concerns about the economic issues of Omicron infections receded.

As expected, the Fed left the target range for the fed funds rate unchanged at 0.00-0.25%, said it will double the reduction of asset purchases to $30 billion per month ($20 billion for Treasuries and $10 billion for agency MBS), and signaled three rate hikes in 2022 amid expectations for continued inflation pressures.

The S&P 500 rallied 3.8% this week, and closed at a record high, as the market overcame concerns about the Omicron variant and reacted positively to hot consumer inflation data. The Dow Jones Industrial Average (+4.0%) and Nasdaq Composite (+3.6%) also rose more than 3.5% while the Russell 2000 rose 2.4%.

Week In Perspective: S&P 500 and Nasdaq Surrender 50-Day Moving Averages [03-Dec-21]

This was a busy four-day week for the market, which ultimately ended in a risk-off note because of news of the highly-mutated Omicron COVID-19 variant. The S&P 500, which set an all-time high early in the week, declined 2.2% for the week. The Nasdaq Composite fell 3.5%, the Dow Jones Industrial Average fell 2.0%, and the Russell 2000 fell 4.2%.

After snapping a lengthy winning streak last week, the market returned to its winning ways, and by "market," we mean the mega-cap stocks.

The stock market's five-week winning streak was put to an end this week, as well as the S&P 500's eight-session winning streak and the Nasdaq Composite's 11-session winning streak.

Each of the major indices set intraday and closing record highs this week, and none rose more than the small-cap Russell 2000 with its 6.1% gain. The Nasdaq Composite rose 3.1%, the S&P 500 rose 2.0%, and the Dow Jones Industrial Average rose 1.4%.

Each of the large-cap indices set intraday and closing record highs this week amid continued strength in the mega-cap stocks. The Nasdaq Composite rose 2.7%, almost matching the 2.9% gain in the Vanguard Mega Cap Growth ETF (MGK). The S&P 500 rose 1.3%, while the Dow Jones Industrial Average (+0.4%) and Russell 2000 (+0.3%) rose modestly.

The stock market powered through a host of negative supply-chain commentary, with investors bidding up growth and value stocks amid a fear of missing out on further gains. The S&P 500 (+1.6%) and Dow Jones Industrial Average (+1.1%) set intraday and closing record highs.

The stock market had a great second half of the week, bolstered by better-than-expected earnings reports, relatively encouraging economic data, and improving technical factors.

Among the many issues overhanging the market (infrastructure, supply chain disruptions, raw material shortages, and inflation, to name a few), lawmakers moved to make the debt ceiling an issue for another day. The Senate passed a bill Thursday to extend the debt ceiling by $480 billion until Dec. 3.

Selling momentum returned to the stock market this week amid a host of concerns, including rising rates and valuations. The Nasdaq Composite fell 3.2%, the S&P 500 fell 2.2%, the Dow Jones Industrial Average fell 1.4%, and the Russell 5000 fell just 0.3%.

The scapegoat for the early weakness was China's Evergrande: reports indicated that the property developer was on the brink of defaulting on its $300 billion in debt. Secondary issues concerned the debt ceiling and infrastructure.