Tuesday December 7th

7-12-2021

Dow futures jump more than 300 points, continuing rebound as investors reassess omicron risk

U.S. stock index futures jumped early morning Tuesday after a rebound from a rollercoaster week as investors grew less fearful of the potential impact from the new omicron coronavirus variant. Futures on the Dow Jones Industrial Average rose 358 points, or 1%. S&P 500 futures rose 1.3% and Nasdaq 100 futures were up 1.7%. Chipmaker stocks were the early winners, with Intel leaping 8.4% and NVIDIA up 3.7%, following news that Intel was planning to take its self-driving car unit, Mobileye, public in mid-2022. Casino stocks also were hot, as Las Vegas Sands rose 3.4%, while cruise lines also gained on the enthusiasm that omicron may pose less of a threat than feared. Carnival and Norwegian Cruise Line Holdings jumped about 3.5% each. Apple shares rose 1.8% in premarket trading following a call from Morgan Stanley, which maintained its outperform rating on the stock but heightened its price target on it to $200, citing the company’s commitment to developing augmented and virtual reality technology. Shares of GlaxoSmithKline were about 1% higher following news that the drugmaker’s monoclonal antibodies treatment had shown effectiveness treating omicron. Elsewhere Tesla shares rose nearly 4% despite news that the company had to replace cameras in three of its models. UBS said the electric carmaker will be the dominant force in the industry and raised its price target. The overnight session followed a comeback on Wall Street that saw the blue-chip Dow gain nearly 650 points. The S&P 500 jumped 1.1% on Monday with all 11 sectors registering gains. The Nasdaq Composite reversed higher to end the day up 0.9%. The rally was led by travel-related stocks such as airlines and cruise line operators. “Easing Omicron fears are making way for investors to position for a more hawkish Fed,” said Fiona Cincotta, senior financial market analyst at City Index. “The markets are dialing back on the potential economic damage that Omicron could cause as initial reports suggest that the new COVID variant is less severe.” Investors are betting that the new Covid-19 strain may cause milder illness than feared. White House Chief Medical Advisor Dr. Anthony Fauci said Sunday that the initial data on the variant is “encouraging,” though he cautioned that more information was needed to fully understand it. Meanwhile, the market also is weighing the likelihood that the Federal Reserve would begin to remove its massive pandemic easing policies and hike rates sooner than expected. Comments by Fed officials suggest the central bank is likely to decide to double the pace of its taper to $30 billion a month at its December meeting next week. Initial discussions could also begin as soon as the December meeting about when to raise interest rates and by how much next year. “After the markets roller coaster ride last week traders are likely at a bit of a crossroads,” said Chris Larkin, managing director of trading at E-Trade Financial. “On one hand Omicron may be less of a threat, but on the other the Fed could potentially accelerate tightening, so we could see some shifts in the market.” Market focus will shift to the new inflation data later this week. The consumer price index, which is expected to be even hotter than the prior month, could become the catalyst for the Fed to deliver faster tightening of its policies. Stocks across Asia-Pacific jumped on Tuesday, bouncing back from Monday losses as Wall Street rallied on optimism that the omicron variant risk might not be as bad as feared. Mainland Chinese stocks were subdued however, with the Shanghai composite edging up 0.16% to close at 3,595.03 and the Shenzhen component down 0.38% to 14,697.17. China’s trade data for November showed that imports came in above expectations, jumping 31.7% in November, according to Reuters. But exports were below expectations, rising 22%. Japan’s Nikkei 225 jumped 1.89% to close at 28,455.60, while the Topix was up 2.17% to 1,989.85. SoftBank shares rebounded nearly 8% after plummeting over 8% on Monday as it tracked losses of tech giants Alibaba and Didi. South Korea’s Kospi was up 0.62% to 2,991.72. Oil prices edged up on Tuesday after a near 5% rebound the day before as concerns about the impact of the omicron variant on global fuel demand eased while Iran nuclear talks hit roadblocks, delaying the return of Iranian crude supplies. Brent crude futures rose 34 cents, or 0.5%, to $73.42 a barrel at 0124 GMT, after settling 4.6% higher on Monday. U.S. West Texas Intermediate crude was at $69.92 a barrel, up 43 cents, or 0.6%, building on a 4.9% gain in the previous session. Gold prices were flat on Tuesday, as a firmer dollar and U.S. Treasury yields weighed on its appeal and confined the metal to a tight $4 range. Spot gold was little changed at $1,778.79 per ounce by 0130 GMT. U.S. gold futures were flat at $1,780.00.