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By Julia Horowitz • Thursday, December 30

Good morning. In today's newsletter: Breaking down the year in financial markets with four big numbers. Plus, a lockdown in China hits top chipmakers, and a second Richard Branson space venture starts trading.

 

US stock futures are up after the Dow closed at its first high since early November on Wednesday. Markets in Europe rose in early trading, while stocks in Asia were mixed.

 

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MARKET FLASH

4 numbers that explain the 2021 market

 

From the start, it was clear that 2021 was going to be a different kind of year for markets. After the tumult of 2020, investors were feeling euphoric, betting that the availability of Covid-19 vaccinations would unlock a huge economic rebound that would send stocks soaring.

 

By and large, they were right.

 

As the year comes to a close, the verdict is in for Wall Street: This was a period of good fortune. Even so, simplistic narratives often fell short, as traders learned to expect the unexpected. After all, there was inflation, which was transitory until it wasn't. Some stocks became memes, notching unbelievable gains. Bitcoin skyrocketed, then plunged — then skyrocketed and plunged again.

 

Here are four figures that shine a light on the most significant trends — and provide clues on where the market could head next.

 

1982: The last time consumer prices in America were rising this quickly

 

The big economic surprise of the year was inflation, which rattled policymakers and could set the stage for more turbulence in 2022.

 

A jump in demand for goods and supply chain bottlenecks sent prices surging at the fastest clip in almost four decades, feeding political discontent and compelling central bankers to roll back crisis-era stimulus measures more quickly than expected.

 

So far, markets have largely shrugged off inflation fears. But it's good to stay humble, and remember just how wrong many forecasters were. In June, the Federal Reserve predicted that its preferred measure of inflation would run at 3.4% in 2021, already well above its target of roughly 2%. The latest data from November showed inflation at 5.7%.

 

70: The number of times the S&P 500 hit a record high this year

 

On Wednesday, the S&P 500 closed at an all-time high. If that sentence feels familiar, it's because this happened 69 other times in 2021, a sign of the market's consistent ability to keep pushing higher despite significant uncertainty about price spikes and the coronavirus.

 

According to Ryan Detrick of LPL Financial, 2021 produced the second most new stock market highs ever. It was also one of the best years for stocks on record, with the S&P 500 on track to finish up 27.6%.

 

Even better: There was only one pullback of 5%. This happens three times a year on average.

 

100 million: The number of GameStop shares traded daily in late January

 

One of the most spectacular market moments of the past 12 months was undoubtedly the GameStop saga.

 

When the struggling video games retailer's shares shot up some 2,700% in January, it woke up Wall Street's suits to the power of armchair investors, who were coordinating on social media networks such Reddit and Discord and using apps like Robinhood to dramatically drive up the stocks of their favorite companies.

 

A report by the US Securities and Exchange Commission later revealed that the volume of stock changing hands was massive. Between Jan. 13 and Jan. 29, an average of 100 million GameStop shares were traded per day, up 1,400% from the 2020 average.

 

And with bigger players now paying attention, the bubble hasn't popped. GameStop is still up 717% year-to-date, even though its losses are widening.

 

2.2 trillion: The value of the global cryptocurrency market in dollars

 

By now, everyone knows cryptocurrencies are an extremely volatile asset class. Yet even by bitcoin standards, this year brought real ups and downs. 

 

The most popular crypto coin rallied above $60,000 for the first time in March before crashing in May, spooking some new investors.  But those who held tight were rewarded. Bitcoin rebounded to an all-time high of $68,789.63 in November — though it is, of course, down again in December.

 

Behind these fluctuations was a larger story. For the first time, many institutions started to take crypto seriously. Payment giants like Mastercard said they would start accepting crypto purchases on their networks. The oldest US bank formed a "digital assets" unit.

 

And why not? $2.2 trillion in market value isn't that big when compared to the size of the global stock market, which was worth $120 trillion in the second quarter. But it's nothing to sneeze at — and growing fast.

 

VOICES

On the housing market's wild ride

"It was an insane year."

 

MATT HOLM, AUSTIN AGENT

 

Read more from CNN Business.

EYE ON CHINA

China's Xi'an lockdown hits top chipmakers

Two of the world's biggest chipmakers are warning that Covid-19 outbreaks and stringent lockdowns in a major Chinese industrial hub are hampering their operations.

 

Samsung and Micron said this week that they've had to adjust their businesses in the northwestern city of Xi'an, which is experiencing one of China's worst community outbreaks of the coronavirus pandemic. Authorities have responded by enacting sweeping measures on a scale rarely seen since the lockdown in Wuhan, the pandemic's initial epicenter.

 

Why it matters: Any slowdown in output from the city risks worsening the global chip shortage, an ongoing crisis that has limited the supply of everything from iPhones to new cars.

 

Intel CEO Pat Gelsinger recently said the global chip shortage is set to last until 2023 as demand remains elevated — putting even more pressure on suppliers to maintain output.

 

Samsung said Wednesday that it had to "temporarily adjust operations" in Xi'an. The South Korean giant added that protecting its workers in the city remains its "top priority," and that it plans to take "all necessary measures, including leveraging our global manufacturing network, to ensure that our customers are not affected."

 

American chipmaker Micron also said Wednesday that Xi'an's lockdown could impact the production of its DRAM memory chips, which are used in computers. The company has had to reduce its workforce at the site.

 

"New or more stringent restrictions impacting our operations in Xi'an may be increasingly difficult to mitigate," the company said. 

 

Important context: Xi'an, an ancient city in Shaanxi province, has reported 1,117 total cases in the latest outbreak. It rolled out city-wide testing and placed its 13 million residents under a strict lockdown last week, closing schools, public venues and transportation. It's the largest in China since 11 million people were sealed off in Wuhan in January 2020.

UP NEXT

Initial US jobless claims for last week post at 8:30 a.m. ET.

 

Coming tomorrow: Before the Bell is taking a break on Friday, but will be back in your inbox on Sunday to kick off 2022.

WHAT WE'RE READING AND WATCHING

▸ Holiday returns will cost retailers 59% more this year (CNN Business)
▸ Facebook's pushback: Stem the leaks, don't say sorry (WSJ)
▸ On the slaughterhouse floor, Covid fear and anger remain (NYT)
▸ SenseTime rallies in Hong Kong trading debut (CNN Business)
▸ Need ideas for a financial New Year's resolution? (CNN Business)
▸ Champagne sales pop ahead of New Year's Eve (Axios)

FINAL WORD

Another Richard Branson space venture is going public

A second Richard Branson space company is about to hit the market.

 

Virgin Orbit is expected to make its debut on the Nasdaq on Thursday after merging with a special-purpose acquisition company, or SPAC.

 

Founded by Branson in 2017, the company makes technology to launch satellites. Its first commercial launches took place earlier this year.

 

On the radar: When Virgin Galactic went public in 2019, it received a warm welcome from investors. Virgin Orbit hasn't had the same experience. Branson announced last week that his Virgin Group would put up as much as $100 million to get the deal over the finish line.

 

"This investment will ensure that Virgin Orbit has the capital required to go and build upon its incredible foundation and continue its rapid transition into a successful commercial space launch company," Branson said.

 

Warning sign: Space stocks have been struggling. Virgin Galactic shares surged as high as $62.80 this year, but have sagged following Branson's much-hyped journey into space over the summer, finishing Wednesday at $13.04.

 

And satellite launch services company Astra Space, which went public earlier this year, saw shares drop to an all-time low this week. Kerrisdale Capital has said it's short the stock, betting it will continue to fall. On Wednesday, it called Astra "2021's worst space SPAC."