Omicron, Covid Drugs, and Here Comes Santa Claus (Market Recap December 24)
December 24 Market Recap – Omicron worries fade, two oral Covid drugs are approved, and the decks are cleared for a Santa Claus Rally!
Dow 35,950 or +585 or +1.7%
Nasdaq 15,653 or +485 or +3.2%
S&P 4,725 (record close) +105 or +2.3%
U.S. 10 Year Treasury Yield 1.495% +8.7 bp or +6.2%
Markets Rally during Short Week on Light Volume
After a bruising three-day selloff that ended on Monday, bargain hunters re-entered the market and bought the dip. President Biden, in a national address, dismissed the idea of another shutdown, pledged national guard troops to assist hospitals and nursing homes and promised 500 million at-home Covid tests free of charge early next year. Seemingly positive, if not early data on the Covid omicron variant was released by South Africa, suggesting that while the variant is extremely contagious, it causes a milder illness, at least in those who have been through a three-dose regimen of vaccines. In addition, two new oral Covid drugs were approved by the FDA which should begin to take some of the strain off of hospitals and their wearied staffs.
The Santa Clause Rally Explained
According to the Stock Trader’s Almanac, the Santa Claus rally period – the final five days of trading of the year and the first two trading days of the new year – have been positive nearly 79% of the time since 1928! The average gain has been 1.7%.
But what about Covid and Omicron?
Cases continue to soar here at home and abroad. The daily average of new infections in the U.S. as of December 23 was 185,141, +54% over the last two weeks. Hospitalizations and deaths are up 10% and 7% respectively over the same time period. However, on Wednesday, South African officials noted that their rate of infections is dropping off just as rapidly as it increased and theorized that the United States may be two weeks away from experiencing the same.
While the markets will be open all five days next week, expect volumes to be light as trading desks will be run by skeletal staffs. Other than Thursday’s Initial Jobless claims and Chicago PMI, economic data will also be scarce.
Merry Christmas and Happy New Year!
Market Data Points Next Week
- Monday – N/A
- Tuesday – N/A
- Wednesday – N/A
- Thursday – Initial Jobless Claims, Chicago PMI.
- Friday – N/A
December 24 Market Recap Trading…
Monday– Dow (433) to 34,932, Nasdaq (188) to 14,980, S&P (52) to 4,568.
- Markets traded down on continued omicron fears and the unexpected demise of President Biden’s Build Back Better (BBB) stimulus bill over the weekend.
- Nine of eleven S&P sectors traded lower today with only Consumer Staples and Utilities up, if barely. The worst sectors were Financials, Materials and Industrials.
- Goldman Sachs cut their Q1 2022 GDP forecast from 3% to 2% after Senator Manchin (D-WV) said he would not support the President’s BBB stimulus bill on Sunday.
- November Leading Economic Indicators were +1.1% vs expectations of +0.9%.
- The 10-year U.S. Treasury yield rose 1.6 bp to 1.424%.
Tuesday – Dow +560 to 35,492, Nasdaq +360 to 15,341, S&P +81 to 4,649.
- The market rallied strongly today as investors bought the dip after three rough days of trading. President Biden gave a national address promising troops to help at hospitals that become overrun with omicron patients and pledged to send 500 million free Covid tests to homes at the beginning of next year.
- Nine of eleven S&P sectors traded higher today led by Energy, Tech, and Consumer Discretionary. Only Consumer Staples and Utilities traded down on the day.
- The 10-year U.S. Treasury yield traded up 5.3 bp to 1.476%.
Wednesday – Dow +281 to 35,753, Nasdaq +180 to 15,521, S&P +47 to 4,696.
- Markets rejoiced over a host of good news that kept the rally alive.
- Early data from South Africa is demonstrating that infections are declining as rapidly as they climbed and that the US is probably two weeks away from experiencing the same effect.
- Further, non-peer reviewed study from South Africa’s National Institute of Communicable Diseases found the omicron had caused fewer hospitalizations and less severe illness than previous variants.
- The FDA approved Pfizer’s Covid-19 oral drug to treat the virus post infection.
- Q3 GDP was revised higher to 2.3% annual growth vs a 2.1% expected increase and the Consumer Confidence Index was 115.8 vs 111 expected.
- All eleven S&P sectors traded higher with Tech, Consumer Discretionary and Healthcare leading the advance.
- The 10-year U.S. Treasury yield traded down almost 2 bp to 1.458%.
Thursday – Dow +196 to 35,950, Nasdaq +131 to 15,653, S&P +29 to 4,725 (record close).
- Markets continued to rally today as the S&P 500 set a new closing high.
- Jobless claims met expectations at 205,000 and last week’s print was revised down slightly to 205,000 as well.
- The FDA approved another oral drug to fight Covid, Merck’s Molnupiravir.
- Nine of eleven S&P sectors traded higher, led by Consumer Discretionary, Industrials, and Materials.
- Economic news: Durable Goods number was a blowout, +2.5% vs expectations of +1.5%, Consumer Sentiment was better than expected. Consumer Spending and Personal Income numbers were in line with expectations.
- All the inflation numbers were hotter than expected: Core Inflation monthly, Core Inflation year-over-year, and the 12 month Personal Consumer Expenditure number was up 5.7%, the largest number since 1982
- The 10-year U.S. Treasury yield traded up 3.7 bp to 1.495%.
Friday – Markets Closed in Observance of the Christmas Holiday.
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Disclaimer: This is not a recommendation to buy or sell any of the securities listed above. I personally, or a family member whose account I control, have positions in the following securities/assets…Bitcoin, Cardano, Chainlink, Ethereum, ETHE, GBTC, and TSLA.