Before The Bell
There’s an old Wall Street expression that the market sometimes “climbs a wall of worry”, and that seems to have aptly described 2021. In the face of the ongoing coronavirus pandemic, and its consequent shutdowns and disruptions to everyday life and business, combined with the highest inflation in decades and the prospect of tighter monetary policy ahead, investors have nonetheless looked beyond all the uncertainty, driving the major indexes to new all-time highs this year. Indeed, if stocks can manage to hold their ground for these last two days of December, the S&P 500 is on course to be up 27% for the year, while the Dow has tacked on 19%, and the NASDAQ is ahead by 22%.
Yesterday ended with the Dow Jones Industrials up 90 points, for a sixth-consecutive positive session. The broader S&P 500 advanced six points, marking its 70th record close for the year. Meanwhile, the tech-laden NASDAQ, although down 15 points for the day, is still less than 3% shy of its 52-week high. Most of the major market sectors were up, led by real estate (+0.6%), healthcare (+0.6%), and utilities (+0.5%). Energy stocks led the decliners, with a loss of 0.6%.
The European stock markets had a mixed session, with the U.K.’s FTSE 100 index of major stocks up 0.7%, while Germany’s counterpart DAX was down by a similar percentage, and France’s CAC-40 index lost 0.3%. In energy markets, oil prices closed up, with light sweet crude advancing about 0.8%, to about $76.60 a barrel. Although the commodity has lost some ground in recent weeks, it is still ahead by more than 55% for the year to date – contributing to the inflation faced by businesses and consumers.
As we start the next-to-last trading day of the year on our shores, stocks in Asian markets (where regular Thursday trading has ended) had a mixed session, but the European exchanges are all up modestly. Meanwhile, U.S. stock futures are suggesting the major indexes here will open to the upside, while crude oil is down slightly.
Economic news and trading volume will be light today ahead of the New Year’s Holiday. The Labor Department announced that initial jobless claims for the week ended December 25 fell slightly, to 198,000, remaining near a 52-year low, while continuing claims for the week ended December 18 were also down, to 1.716 million. Both figures came in better than consensus estimates. Next week brings a number of key reports, including the Institute for Supply Management’s December readings for manufacturing and services, along with the latest reports on job openings, the trade deficit, factory orders, and nonfarm payrolls, among others.
For the near term, the market will likely continue to be driven by developments on the coronavirus front. Although experts continue to report that the Omicron variant is far less deadly than the Delta strain, the sheer number of cases is threatening to overload healthcare systems across the globe, and mandatory closings and/or quarantines will likely weigh on worldwide economic growth in the first quarter of the New Year. For now, it appears, market volatility is likely to remain elevated at the start of the year.
– Mario Ferro
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
