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Stock Market News for Jan 4, 2022

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Wall Street closed higher on Monday, the first trading day of 2022, extending the bull-run that has started since mid-2020. Market participants shrugged off Omicron fears and possibility of the Fed to hike interest rate earlier-than-expected. All three major stock indexes ended in green.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) surged 0.7% or 246.76 points to close at 36,585.06, marking a new closing high. Notably, 22 components of the 30-stock index ended in green while 8 in red. The tech-heavy Nasdaq Composite finished at 15,832.80, climbing 1.2% or 187.83 points due to strong performance by large-cap technology stocks.

Meanwhile, the S&P 500 gained 0.6% to end at 4,796.56, marking a fresh closing high. However, six out of eleven sectors of the benchmark index closed in negative territory while five in green. The Consumer Discretionary Select Sector SPDR (XLY), the Energy Select Sector SPR (XLE), the Financials Select Sector SPDR (XLF) and the Technology Select Sector SPDR (XLK) gained 2.9%, 3.1%, 1.2% and 1%, respectively.

The fear-gauge CBOE Volatility Index (VIX) was down 3.6% to 16.60. A total of 10  billion shares were traded on Monday, lower than the last 20-session average of 10.36 billion. Advancers outnumbered decliners on the NYSE by a 1.34-to-1 ratio. On Nasdaq, a 2.27-to-1 ratio favored advancing issues.

Omicron Fears Ebb

Global financial markets have been suffering from severe volatility since Black Friday of 2021, following the emergence of the new coronavirus variant — Omicron — in South Africa. However, as the days progressed, it has become clearer to medical scientists and doctors that Omicron is much less severe than the previous coronavirus variants like Alpha, Delta and Delta+.

By the end of 2021, most countries reported that Omicron is quickly replacing Delta as the dominant coronavirus variant meaning both hospitalization and casualties will reduce to a great extent. Several major pharmaceutical and biotech firms have stated that the pandemic will gradually reduce to an endemic like flu virus by 2023.

Consequently, reopening sectors like airlines, leisure-travel and casino gained significantly. Shares of Norwegian Cruise Line Holdings Ltd. (NCLH - Free Report) , American Airlines Group Inc. (AAL - Free Report) and Las Vegas Sands Corp. (LVS - Free Report) jumped 6.9%, 4.4% and 3.2%, respectively.

Government Bond Yield Rises

The Fed will terminate its quantitative easing program in March 2022. A large section of economists and financial researchers are expecting the central bank to hike the benchmark lending rate for the first time in three years either in March or in April. As a result, the yield on the benchmark 10-Year U.S. Treasury Note increased 13.2 basis points to 1.628%, reflecting the largest one-day gain since Nov 9, 2020.

A hike in interest rate will raise the cost of funds, which would enable the financial sector, especially banks, to widen the spread between longer-term assets, such as loans, with shorter-term liabilities, thus boosting profits margins.

Consequently, shares of major banks like Bank of America Corp. (BAC - Free Report) and Citigroup Inc. (C - Free Report) jumped 3.8% and 4.5%, respectively. Bank of America carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Economic Data

IHS Markit reported that the final reading of U.S. manufacturing PMI for the month of December came in at 57.7, marginally below the initial reading of 57.8.

The Department of Commerce reported that construction spending in November rose 0.4% at a seasonally adjusted annual rate of $1.63 trillion. The consensus estimate was for an increase of 0.07%. October’s data was revised upward from a rise of 0.2% to 0.4%.

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