Stocks End Higher as Investors Digest Omicron Spread, Economic Data
U.S. stock indices closed higher in the shortened holiday trading week, with the S&P 500 hitting a new high, as investors digest economic data and developments related to the Omicron variant spread.
The S&P 500 rose 0.6%, or 29.23 points, to 4,725.79, its 68th closing record in 2021. Thursday’s rise, its third consecutive daily increase, followed a Wednesday session in the during which strong economic data helped allay investor concerns about the risks posed by Covid-19 and inflation. The tech-focused Nasdaq Composite rose 0.85%, or 131.48 points, to 15,653.37. The Dow Jones Industrial Average added 0.55%, or 196.67 points, to 35,950.56.
New data from the Commerce Department showed that growth in consumer spending in the United States slowed down last month. The US price index for personal consumption expenditure excluding food and energy, an indicator of inflation, rose 4.7% in November from a year earlier. The first claims for unemployment benefits, an indicator of layoffs, remained at 205,000 during the week ended December 18, unchanged from the previous week.
Market gains this week suggest investors remain focused on the trajectory of the pandemic, said Greg Bassuk, managing director of AXS Investments, an asset management company for alternative investments. Developments in Covid-19 treatments and vaccines appear to be contributing to expectations of an economic recovery in 2022 despite the spread of the Omicron variant, added Bassuk.
“We think Covid is still the investor story,” Mr. Bassuk said.
U.S. regulators have cleared the use of a Covid-19 pill from Merck and its partner Ridgeback Biotherapeutics LP, the latest easy-to-use therapy that infected people can take to avoid hospital. Merck stock fell 0.6%. Novavax said its two-dose Covid-19 vaccine has demonstrated “strong immune responses” against Omicron and other variants. Its shares closed 3.3% lower.
Higher inflation and low yields on government bonds have deterred some investors from holding them this year, due to lower yields linked to their hold-to-maturity. The yield on the benchmark 10-year Treasury bond climbed to 1.492% Thursday from 1.457% Wednesday. Yields increase when prices fall.
Strong inflation data helped the Federal Reserve earlier this month accelerate the end of its pandemic-era stimulus measures. Investors and central bankers fear the Omicron variant will put additional pressure on inflation.
“Inflation is center stage for a lot of people,” said Andrew Cole, London head of multi-asset management at Pictet Asset Management. “Inflation is expected to peak, if not in the first quarter, in the first half of next year. You may have to wait until the second half of next year for central banks to relax. “
AXS Investments’ Mr Bassuk said Thursday’s gains in travel and hospitality stocks reflect investor optimism for the containment of the pandemic. Shares of the Marriott International hotel chain gained 1.6% and United Airlines Holdings rose 0.7%.
Investors appear to be positioning themselves for a rebound in global travel next year, depending on changing rates of Covid-19 cases and changes in policy, said Paul Baiocchi, chief strategist of traded funds. stock exchange at SS&C ALPS Advisors.
“There is an opportunity to increase travel spending,” said Baiocchi, who expects a growth stock rotation next year.
Abroad, the Stoxx Europe 600 grew by 1%. Major Asian stock indices closed higher, with China’s Shanghai Composite gaining 0.6% and South Korea’s Kospi 0.5%. Japan’s Nikkei 225 added 0.8%.
JD.com shares fell 7% in Hong Kong after Chinese social media giant Tencent Holdings said it was divesting most of its stake in the online retailer. Tencent shares rose 4.2%. Hong Kong’s larger Hang Seng Index gained 0.4%.
Corrections and amplifications
The technology-focused Nasdaq Composite rose 0.85%. An earlier version of this article incorrectly stated that the index rose 0.2%. (Corrected December 23)
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Appeared in the print edition of December 24, 2021 as “S&P 500 Scales Another High”.