US stocks appeared to open near record highs on Monday, as investors built on momentum from last week into at least the first session of the new year.
Contracts on the Dow rose by around 200 points, or 0.6%, ahead of the opening clock. Nasdaq futures outperformed as technology stocks advanced, and S&P 500 futures rose nearly 0.7%.
US equities posted another year of solid gains in 2021, rising 27% and delivering a rare third consecutive double-digit annual percentage increase. Within the S&P 500, the energy and real estate sectors performed better, earning more than 42% each during the year for these sectors̵[ads1]7; best annual gains ever.
Nevertheless, the robust overall rise of the blue-chip index was driven on a stock-by-stock basis by just a handful of mega-cap names. According to Goldman Sachs analyst David Kostin, the five largest components in the S&P 500 (or Facebook, Apple, Amazon, Microsoft, Google) gave a total of 37% last year – and now make up around 23% of the entire index.
“In 2022, variables related to earnings and valuation will determine the performance of the S&P 500 index and its underlying components,” Kostin wrote in a note on Monday. He expects the index to rise further around 7% to end 2022 at 5,100, with his outlook one of several Wall Street predictions demanding a gain of more than 5,000 for the S&P 500 this year.
“From an earnings perspective, declining economic growth will limit capital gains for many companies. Consequently, the spread of equity returns will be most evident when viewed through the margin channel,” Kostin added. “Shares with high labor costs and exposure to wage growth are likely to underperform.”
But for the S&P 500 as a whole, a 27% increase and 29% total return over the past year promises to be positive for the coming period. In the 71 years dating back to 1950, when the S&P 500 yielded a total return of 25% or more in a year, stocks rose 82% of the time next year, according to data from Truist Advisory Services co-chief investment officer Keith Lerner . However, the size of the return can be moderated.
“I think 2022 is going to be a good year that tends to be a great year,” Sam Stovall, CFRA’s investment strategist, told Yahoo Finance Live late last week. “We certainly have a high wall of concern that we need to scale … when it comes to inflation concerns, what the Fed will do with interest rates, et cetera.”
And in fact, this week, investors will be looking at new economic data, including the Labor Department’s job report in December to show the relative strength of US economic growth in the last weeks of the year, as inflation concerns and labor shortages continued to surge across the country. Risks around the latest wave of the coronavirus also weigh, with effects on the labor market from the Omicron variant that could potentially appear in the final monthly job report for 2021.
07:45 ET Monday: Stock futures appear to open near records
Here is where the markets traded before opening Monday morning:
S&P 500 futures (ES = F): +27 points (+ 0.57%), to 4785.50
Dow futures (ÅM = F): +166.00 points (+ 0.46%), to 36,392.00
Nasdaq futures (NQ = F): +110.75 points (+ 0.68%) to 16,431.50
Rough (CL = F): + $ 0.32 (+ 0.43%) to $ 75.53 per barrel
Gold (GC = F): – $ 6.20 (-0.34%) to $ 1822.40 per ounce
10-year Treasury (^ TNX): +3.5 bps to give 1.463%
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter