Stocks end the year on a positive note

Stocks extended their Santa Claus rally on hopes the Omicron variant will not cause serious economic damage next year, even if the number of cases skyrocketed around the globe. The S&P 500 rose +0.85% week-over-week amid thin trading volumes and low volatility (VIX down 4% at 17.2), after hitting an intraday record high of 4,809 on Thursday. The Dow Jones Industrial Average gained 388 points at 36,338.30, or +1.08%. The Russell 2000 edged up +0.17%.

International stocks performed in line with their U.S. counterparts. The MSCI World added +0.78%. In Europe, The MSCI EMU jumped +0.96%. In Asia, the Shanghai Composite was up +0.60% while Japan’s Nikkei treaded water (+0.03%) after three positive weeks.

Gains in almost all sectors  

Unlike last week, defensive sectors such as real estate (+3.69%), utilities (+2.64%) and consumer staples (+2.48%) were the biggest gainers in the last few days of December. Consumer discretionary (+0.42%) lagged behind as Amazon plunged -2.54%. Furthermore, Tesla vaulted (-0.96%) after the EV maker announced that nearly half a million cars must be recalled due to safety issues. Information technology (+0.47%) and financials (+0.60%) also underperformed the broad market, but it was tougher for communication services (-0.79%), the only S&P sector in the red, pushed lower by ViacomCBS (-1.30%), Google (-1.67%), Netflix (-1.90%), Twitter (-2.13%), and Discovery (-3.60%).

Treasury yields edged higher

U.S. Treasuries continued to stay firm ahead of New Year’s Eve. The 10-year T-note yield closed at +1.52% (+3bps over the week). In Germany, the 10-year Bund yield followed suit, jumping 7bps from -0.25% to -0.18%. In the same way, the French OAT yield rose from +0.12% to +0.20%, the highest level in two months.

Corporate investment grade bonds closed mixed (-0.29% in Europe, +0.30% in the U.S.). In the high-yield space, the trend remained positive on both sides of the Atlantic for the fifth straight week (+0.03% in Europe, +0.21% in the U.S.). Emerging debt fell -0.34% in local currencies though the greenback weakened (dollar index down -0.89%). Elsewhere, gold extended its winning streak to a fourth week (spot price at$1,829.20, or +0.65%).