US stocks close higher, oil gains on Omicron optimism
US equities continued to rise on Tuesday, as equities and oil prices rose in the hope that Omicron would prove less harmful to the economy than feared.
The benchmark index S&P 500 rose 95.08 points, or 2.1%, to 4686.75, built on Monday’s rise and recovered all the losses from last week. The technology-focused Nasdaq Composite Index jumped 461.76 points, or 3%, to 15686.92, while the Dow Jones Industrial Average rose 492.40 points, or 1.4%, to 35719.43.
The hope that the new Covid-19 strain will have a less pronounced impact on travel and consumer confidence has strengthened shares this week. Researchers and vaccine manufacturers are still assessing the severity of Omicron and how well existing vaccines can work against it.
The balance in the latest Omicron updates seems to indicate that another big financial shock is not coming, which has triggered short coverage and a purchase after a few weeks of losses, said ThinkMarkets analyst Fawad Razaqzada. “It̵[ads1]7;s a relief meeting,” he said.
In the end, however, investors are likely to focus on monetary policy and the pace of the Federal Reserve’s downsizing program, Razaqzada said. “It’s going to be the next big thing for the market,” he said.
This week’s rise puts stocks more in line with their usual seasonal results. December tends to be a very strong month for equities. The S&P 500 and Dow have historically risen in December more often than in any other month.
However, uncertainty surrounding Covid and Fed policies could challenge the usual holiday cheer. In addition, lower trading volumes ahead of the holiday season are likely to lead to excessive movements in both directions, analysts say.
“We are in this period where investors are fighting for all the news they can find, and that, combined with low liquidity, leads to some big moves,” said Hugh Gimber, a strategist at JP Morgan Asset Management.
The S&P 500 recovered almost all the losses for last week on Monday.
Photo:
ANDREW KELLY / REUTERS
US equities were led by more risky, more growth-oriented sectors, such as technology, energy and consumer discretion. All 11 of the S&P 500 sectors rose. Some consumer stocks that are particularly sensitive to Covid-19 development, such as Marriott International,
Hilton Worldwide and Royal Caribbean,
fell in afternoon trading, and closed lower.
Bank shares, which have been tipping over with the latest Omicron news, rose. Morgan Stanley jumped 3.3% to $ 102.50, Wells Fargo increased 3% to $ 50.25 and JPMorgan rose 1.5% to $ 162.57.
For biotechnology‘s
shares rose 12% to $ 42.98 after the immunology company and its partner, GlaxoSmithKline,
said that their Covid-19 antibody treatment proved effective against the Omicron variant in laboratory studies.
Shares of Intel rose 3.1% to $ 52.57 after The Wall Street Journal reported that they planned to announce shares in Mobileye self-driving car unit, the latest move by CEO Pat Gelsinger to revive the semiconductor giant’s fortunes.
US crude oil futures rose 3.7% to $ 72.05 a barrel as fears of renewed Covid-19-related shutdowns subsided. US crude oil is up 8.7% the last two sessions. Brent oil, the global oil reference, rose 3.2% to $ 75.44 a barrel. The move marked its fourth consecutive increase and the largest four-day percentage increase since January.
China’s efforts to inject liquidity into the financial system have also helped reassure investors that the downturn in the world’s second largest economy will be addressed, Gimber said. On Monday, the People’s Bank of China said it would reduce the reserve ratio for banks by 0.5 percentage points to 8.4%, starting on December 15. This will release around 1.2 trillion yuan, equivalent to around 188 billion dollars, into the financial system.
The shares of Chinese real estate developers listed in Hong Kong were largely higher on the plans, which could help China’s debt-laden real estate sector. Sunac China Holdings increased by more than 15%, while China Aoyuan Group increased by more than 10%.
Debt-ridden Evergrande has started a campaign on social media to show that construction has resumed.
Hong Kong’s broader Hang Seng index rose 2.7% to 23983.66, while China’s Shanghai Composite rose 0.2% to 3595.09. Japan’s Nikkei 225 rose 1.9% to 28,455.60 and South Korea’s Kospi rose 0.6% to 2991.72. In Europe, the pan-continental Stoxx Europe 600 rose 2.5% to 480.18.
Bitcoin, the world’s largest cryptocurrency by market value, rose 1.5% to $ 50,747, according to CoinDesk, as it continued to recover after the weekend’s sale.
In the bond markets, the yield on the benchmark index for 10-year government bonds rose to 1.479% on Tuesday from 1.433% on Monday. Yields rise when prices fall.
Write to Caitlin Ostroff at caitlin.ostroff@wsj.com and Paul Vigna at Paul.Vigna@wsj.com
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