U.S. stocks rose on Monday after the holiday, as analysts questioned whether the favorable market conditions that had driven Wall Street to all-time highs this year will continue into 2022.
The broad S&P 500 stock index gained 0.9%, after a record close on December 23 after weeks of volatility driven by the Omicron coronavirus variant and the US Federal Reserve preparing to cut its emergency stimulus measures .
The technology-driven Nasdaq Composite stock gauge added 1.1 percent.
The S&P is up more than a quarter this year, boosted by a rebound in corporate earnings following a coronavirus-induced slowdown in 2020 and rock bottom interest rates that have prompted investors to invest in stocks.
US monetary conditions remain very accommodating and recent economic data is solid. Some Wall Street strategists, however, expect more moderate stock market gains for the coming year, as the Fed raises borrowing costs to cope with soaring inflation brought on by pressure on corporate chains. supply due to restrictions induced by the pandemic as well as rising rents and energy prices.
“We are generally constructive about the outlook for US stocks to 2022, although the expected rise is lower than in previous years,” Citi strategist Scott Chronert wrote in a note to clients. “Current inflation concerns imply that the Fed’s response will remain critical to the direction of the market.”
Louis Gave, of the Gavekal research house, warned that Omicron could “wreak havoc on economies and stretch supply chains.” But he also pointed to what he called “encouraging” South African data that suggested the new, highly transmissible variant may be less likely to result in hospitalizations than Delta.
The Fed is set to end its emergency stimulus package, in which it bought about $ 120 billion in government and mortgage bonds per month during the pandemic in March. Central bank officials plan to hike interest rates three times in 2022.
The yield on the benchmark 10-year US Treasury bond, which moves inversely to the price of government debt, was broadly stable at around 1.48% on Monday.
This debt instrument has traded relatively calmly this month, as investors took into account a short period of rate hikes that would not strongly affect bond yields, relative to cash, over time.
Shorter-term public debt, however, bore the brunt of bets on tightening monetary policy. The two-year Treasury yield rose 0.03 percentage points to just under 0.72%, near its highest level since March 2020.
Elsewhere, the European regional stock index Stoxx 600 closed up 0.6%. Trading on the London FTSE 100 has been halted for the holidays.
The dollar index, which measures the US currency against six others including the pound sterling and the euro, rose 0.1%.
The British pound rose 0.4% against the dollar to around $ 1.34. British Health Secretary Sajid Javid said on Monday that there would be no new Covid restrictions introduced in England until the New Year. The country’s three decentralized administrations, namely Scotland, Wales and Northern Ireland, have reintroduced some measures.
The price of Brent crude, the benchmark for oil, rose 3% to $ 78.77 per barrel.