Dow, S&P 500 end at records Wednesday as stocks rally in final week of 2021

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By Joy Wiltermuth and Mark DeCambre

10-year Treasury yield hits 1.542%, highest level in about a month

Major U.S. stock indexes swept to record closes Wednesday, except for the Nasdaq Composite Index, which finished slightly lower as longer-dated Treasury yields climbed to one-month highs.

The omicron variant of the coronavirus remains a focus for investors, but the new strain has yet to significantly impede the market’s recent uptrend, even as the World Health Organization on Wednesday reported that the number of COVID-19 cases recorded world-wide increased by 11% last week compared with the previous week, led by the Americas.

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How did stock indexes trade?

On Tuesday, the Dow rose 95.83 points, or 0.3%, to end at 36,398.21, its second-highest close ever, marking a fifth straight advance for the blue-chip index. The S&P 500 slipped 4.84 points, or 0.1%, to close at 4,786.35, a day after closing at a record. The Nasdaq Composite fell 89.54 points, or 0.6%, to finish at 15,781.72.

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What drove the market?

The Dow scored its first record close Wednesday in almost seven weeks, but investors struggled to find fresh incentives to push the rally substantially higher in the final days of 2021.

Investors mostly have shaken off fears about COVID-19 impeding the U.S. economic recovery, but the interest-rate sensitive Nasdaq Composite closed slightly down Wednesday as the yield for the 10-year Treasury rose to its highest level in about a month at 1.54%.

“In terms of COVID, I think the market has largely been expecting it to be a temporary setback,” said James Ragan, director of wealth management research at D.A. Davidson, in a phone interview. “The consumer tends to come back pretty fast from these outbreaks,” he said.

Wall Street has been wagering that this year’s economic recovery and strong earnings from U.S. corporations will continue to underpin equity buying into 2022, at least for the first few months.

As COVID case counts rise, the U.S. has started shipping some doses of the recently authorized COVID-19 antivirals developed by Pfizer Inc. (PFE) and Merck & Co. Inc. (MRK), pills intended to be prescribed for people with mild or moderate cases.

“Despite global surges in Covid cases, the markets are reflecting the new reality that Covid is here to stay albeit more on our terms than its,” Kevin Philip, managing director at Bel Air Investment Advisors, wrote in emailed comments Wednesday, adding that next year he expects more “normalcy” to return to the world.

“With vaccines, boosters, treatments, and rising herd immunity, it seems more and more like a manageable virus in line with colds and flus than what it originally was,” he said. “We also have a friendly Federal Reserve, which the market views is responsibly accelerating its wind-down of QE.”

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In U.S. economic data Wednesday, the trade deficit in goods surged by 17.5% in November to set an all-time high, keeping the U.S. on track in 2021 to post its biggest annual shortfall on record. An early or advanced look at the trade gap in goods showed that it increased to $97.8 billion in November from a revised $83.2 billion in October, according to the U.S. Census Bureau. The U.S. is poised to surpass a record set in 2006 and incur its biggest international trade deficit ever.

Separately, the number of home buyers who signed a contract to purchase a home in November declined, as high home prices give buyers pause. Pending home sales decreased 2.2% in November compared with October, the National Association of Realtors reported Wednesday.

-Joy Wiltermuth

Which companies were in focus?

How did other assets fare?


(END) Dow Jones Newswires

12-29-21 1627ET

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