U.S. stocks opened in 2022 with modest gains as investors monitored cases of the Omicron variant of Covid-19 and other factors that could weigh on stocks this year.
The S&P 500 gained 0.4% at the start of Monday’s session. The index ended 2021 up 27%, hitting 70 records along the way. The technology-focused Nasdaq Composite Index rose 0.7% on Monday morning, and the Dow Jones Industrial Average added 0.3%.
Investors see a more difficult path for stocks this year. The initial rollout of Covid-19 vaccines and the easing of restrictions to contain the spread of the coronavirus, along with easy money policies from central banks, helped support markets last year. The unwinding of the Federal Reserve’s bond purchase program and likely interest rate hikes could weigh on markets in 2022. Equities benefited from low rates, which fueled riskier investments.
While some investors expect inflation, which peaked in 39 years in November, to peak, others fear Omicron will prolong supply chain disruptions, adding pressure additional on prices.
âIt’s going to be a bit more chaotic than in 2021. The big three issues that we ended the year with are still here: Omicron, inflation and supply chains, and the Fed,â Esty Dwek said. , director of investments at FlowBank. âThere is definitely a potential for outperformance for the equity markets. I don’t think we’ll see more than 20%, but we might see double digit numbers. ”
Signs that the Omicron variant may induce significantly milder highs than previous strains also supported sentiment as the start of the year approaches. Fund managers hope this will limit mobility restrictions weighing on economic growth.
âThe wave we’re seeing now, you see a lot of cases but you see fewer people in hospitals and fewer deaths. This will reassure the markets, âsaid Geir Lode, head of global equities at Federated Hermes.
Despite the uncertainty, investors have history on their side. The S&P 500 has gained more than 10% a year for the past three years, a long streak of gains that has only happened four other times, said Frank Cappelleri, executive director of brokerage firm Instinet. The index rose again in three of the previous four occurrences.
In corporate news, technology stocks will once again be the center of attention. The annual Consumer Electronics Show begins Monday in Las Vegas, this time live as opposed to last year’s virtual conference. Companies that are even tangentially tied to technology, from automakers to education to healthcare, will be present in one form or another.
The tech sector of the S&P 500 was up 0.2%.
Tesla shares jumped 9.4% after electric vehicle maker Elon Musk said annual vehicle deliveries jumped 87% in 2021, growing at their fastest pace in years.
On the commodities side, US crude oil escaped early sales, most recently down just 0.1% to $ 75.15. Brent crude, the world benchmark, was up 0.2%.
In bond markets, the yield on the benchmark 10-year Treasury bill climbed to 1.603% from 1.496% on Friday. Yields increase when prices fall.
Abroad, the Stoxx Europe 600 gained 0.6%. Markets in China, Japan and Australia have been closed for a holiday. South Korea’s Kospi closed 0.4% higher and Hong Kong’s Hang Seng fell 0.5%.
Investors are monitoring Chinese economic activity and policies to assess how strong global growth will be this year and whether the country’s strict Covid-19 prevention measures will put additional pressure on supply chains and inflation . Next month’s Winter Olympics in Beijing are built around a ‘Covid zero’ approach that could affect economic activity, Ms Dwek said.
Write to Caitlin Ostroff at [email protected]
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