Santa Claus Rally

Stocks rised ahead of Christmas holiday, shrugging off concerns about inflation and Omicron variant’s high transmissibility. Yet fresh data shows that this variant is less dangerous than the previous strains, even if it is much more contagious.

For the week, the S&P 500 finished up +2.28% at an all-time high close (4,725.79). The Dow Jones also closed higher (+585 points at 35,950.56, or +1.65%) but the best performance among the leading U.S. indices came from the Nasdaq Composite (+3.19%), as traders were buying the dip in tech.

International stocks performed in unison despite low trading volumes. The MSCI World jumped +2.14%. In Europe, The MSCI EMU gained +2.19%, while the FTSE 100 added +1.41%. In Asia, Japan’s Nikkei recorded a third week of gains (+0.83%), as downward pressure on the yen grew again, giving exports a competitive advantage overseas. The Hang Seng edged up +0.13%.

All 11 S&P sectors in positive territory  

For the second time this month, all the economic sectors finished the week in the green. Consumer discretionary led the pack (+3.82%) as Tesla rose more than 14.4%, after chief executive Elon Musk said he had sold “enough stock” to meet his goal of selling 10% of his stake in the EV maker. Investors also piled into tech stocks (+3.27%), communication services (+2.54%), and energy (+2.37%) as oil prices advanced (WTI crude up +4.13%) thanks to a larger-than-expected decrease in weekly U.S. crude inventories (down 4.7 million barrels during the week ending Dec. 17).

Unlike last week, the most defensive corners of the market lagged behind. Utilities and real estate edged up +0.24% and +0.50% respectively but remained the best performers with health care over the last four weeks.

Treasuries in roller-coaster mode

U.S. Treasuries continued to alternate negative and positive weeks. They bounced back ahead of the Christmas holiday period. The benchmark 10-year yield closed at +1.49% (+8bps over the week). In Germany, the 10-year Bund yield followed suit, jumping 13bps from -0.38% to -0.25%, while the French OAT yield rose to +0.12%, the highest level in four weeks (+15bps), in the wake of additional health restrictions.

Similarly, corporate investment grade bonds finished the holiday-shortened week in the red (-0.48% in Europe, -0.26% in the U.S.). In the high-yield space, the trend remained positive on both sides of the Atlantic for the fourth week in a row (+0.03% in Europe, +0.56% in the U.S.). Emerging debt was up +0.91% in local currencies. Elsewhere, gold extended its winning streak to a third week (spot price at $1,817.32, or +1.07%).