Market Insights

Stocks just had their best week since February as buyers defied worries about the omicron variant, amassing technology stocks and reopening plays.

The S&P 500 rose 3.8 percent between Friday, December 3, and Friday, December 10. The index established a new all-time closing high near its peak in late November, while other benchmarks like the Nasdaq-100 and Dow Jones Industrial Average remain further from record territory.

Major technology stocks and travel-related names drove the gains. Software giant Oracle (ORCL) and chip maker Broadcom (AVGO) jumped further into uncharted territory after results beat estimates. Apple (AAPL) kept running amid strong demand for iPhones. Cruise lines and energy producers also snapped back from the coronavirus scare in late November.

Consumer prices rose slightly more than forecast last week at their fastest pace in four decades. However low bond yields suggest investors believe that the Fed will keep a lid on inflation. Other economic data was positive as the economy continues to return to normal. Initial jobless claims fell more than expected to their lowest level since 1969 and consumer sentiment beat estimates thanks to low-income wage gains.

Another Wall of Worry?

Stocks could be climbing another “wall of worry” that resulted from the omicron scare. The American Association of Individual Investors showed the third-lowest “bullish” sentiment reading of 2021 after the new variant emerged. But then a record $1.47 billion flowed into the TQQQ leveraged Nasdaq-100 exchange-traded fund, according to Bloomberg. Once again, traders braved the selloff to buy the dip.

Cboe’s volatility index (VIX) had also jumped because of omicron. But last week it fell almost as sharply as confidence returned. The so-called fear index remains about 50 percent above pre-pandemic levels. Will risk appetite increase if the VIX slides further?

Ford Motor (F) ripped to its highest level in 20 years after strong demand forced the automaker to stop taking orders for its all-electric F-150 Lightning.

Aside from technology, last week’s outperforming industries included homebuilders, airlines and software makers.

Charting the S&P 500

The rally followed the S&P 500’s biggest two-week drop since the period before the last Presidential election. It brought the index to its 50-day moving average and old peak from early September. That may suggest old resistance has become new support.

Investors may next eye the November 22 high of 4744. Prices reversed sharply from that level, forming bearish outside candles on both the daily and weekly charts.

Here Comes the Fed Taper

This is the last big week of 2021 for scheduled news events. While the Fed announcement on Wednesday is important, the calendar features several other noteworthy catalysts.

First is the producer price index (PPI) inflation report tomorrow.

Retail sales are due the next morning, followed by NAHB’s housing-market index and crude-oil inventories.

The Fed’s announcement comes at 2 p.m. ET on Wednesday, followed 30 minutes later by chairman Jerome Powell’s press conference. Policymakers said in November they want to taper asset purchases by $15 billion a month. More recently they suggested it could go twice as fast, meaning that all stimulus will be gone by March. That, in turn, will let them start raising interest rates sooner.

Thursday is also busy, with initial jobless claims, housing starts and building permits and industrial production. Adobe (ADBE) and FedEx (FDX) report earnings.

Friday could be active because it’s so-called Quad Witching. That means it has expirations for stock options, index options, index futures and single-stock futures.

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