US stock indexes were mixed on Tuesday, a day after the S&P 500 index closed a record low amid a drop in liquidity in the final days of the year.
The S&P 500 swung between small gains and losses, touching a new intraday high in morning trading, after the broad market index rose 1.4% on Monday. It was recently down 0.2%. The Dow Jones Industrial Average rose 0.3% while the Nasdaq Composite was down 0.7%.
Stocks have been hurt by the spread of the Omicron variant in recent weeks as governments around the world have imposed restrictions in a bid to curb coronavirus infections. But some recent studies have suggested that the alternative may lead to milder disease with a lower risk of hospitalization.
The Centers for Disease Control and Prevention has lowered the recommended isolation period for some people who have tested positive to try to reduce disruptions. However, many economists have lowered their forecasts for economic growth in the first quarter of next year.
“What stems from the markets is the belief that Omicron will not be able to disrupt the economic recovery,” said Antonio Cavarero, chief investment officer at Generali Insurance Asset Management. “There is no clear limit to the risk.” He said this is partly due to the low cash flow from fewer people working during the holidays.
Stock investors are watching a phenomenon known as the “March of Santa Claus.” Indices like the S&P 500 tend to rise in the last five days of the year and the first two days of the new year. This spike occurs towards the end of about four out of every five years, according to “Stock Trader’s Almanac.”
“It happens because people start positioning themselves. People are reading everyone’s estimates for 2022 and planning for next year,” said Jeffrey Myers, hedge fund and family office advisor at Market Securities.
Governments and policy advisors are showing signs of taking a lighter touch with policies around the rapidly spreading Omicron variant, reducing quarantine times and in some cases abandoning social distancing restrictions as they try to keep economies moving. Vaccine makers gave up their gains earlier in the session, with Novavax slipping 4.4% and Moderna slipping 3.1%.
The news helped travel and energy stocks, with United Airlines and Valero Energy both adding 1.9%.
Reducing quarantine times is bullish for investors and is prompting market participants to look beyond Omicron’s rush, said David Kottock, chief investment officer at Cumberland Advisors. But he added that it also risks allowing the Covid-19 virus to mutate, spread and disrupt economies. He’s overweight in healthcare stock.
“This is not over yet, and the markets want to celebrate its over. But the virus does not care what the markets want,” Mr. Kotok said.
Oil prices rose, with global benchmark Brent climbing 0.6% to $78.67 a barrel.
The yield on the benchmark 10-year Treasury reversed an early decline, rising to 1.482% from 1.480% on Monday. Short-term bond yields soared, with the two-year yield coming in at 0.738%.
The S&P CoreLogic Case-Shiller National Home Price Index, which measures average home prices in major metropolitan areas across the country, showed US home price growth slowed in October. Homebuilders stocks rose during the Tuesday session, with DR Horton advancing 0.6% and Taylor Morrison advancing 0.88%.
Earnings season is largely over. Among the few who still report the egg product Cal-Maine FoodsAnd
The results are expected to be announced on Tuesday after the markets close.
Mr. Kotok said US companies will enter 2022 with a very high level of corporate earnings. This will require companies to achieve solid earnings growth next year, in the face of less fiscal and monetary policy stimulus.
“I’m a terrified bull,” he said.
Bitcoin is down about 7% from its level at 5 PM ET on Monday, trading around $47,429. The cryptocurrency has fluctuated around the $50,000 mark over the past five days.
Offshore, the Stoxx Europe 600 continental index was up 0.6%.
The Turkish lira rose 1.3% to 11.8 against the dollar. The currency strengthened after the government announced last week a new economic plan. Mr. Myers said President Recep Tayyip Erdogan “may have bought Turkey some time but it’s still not a great story”. He said that speculative investors are likely to close short positions ahead of the long weekend and may return now, which weighs on the lira.
In Asia, most major benchmarks have risen. The Shanghai Composite Index is up 0.4% and Hong Kong’s Hang Seng Index is up 0.2%. Japan’s Nikkei 225 advanced 1.4%, led by gains in technology stocks.
China Evergrande Group shares pared early gains, rising 3.8%. The debt-laden property developer said construction work has resumed on more than 90% of its stalled housing projects. She also said she was delivering apartments faster to homebuyers.
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