The Fed and other central banks could deliver a ‘Santa Pause’ rally for global stocks this year as they dial back the size of rate hikes, Schwab says

Santa Christmas Wall Street stocks
A “Santa Pause” rally may be on its way for 2022.

  • A “Santa Pause” rally for stocks may be taking shape as central banks signal a step-down in rate hikes, Charles Schwab said. 
  • The Fed and the BoE are among those indicating they’re considering less aggressive rate hikes in the future.
  • The MSCI EAFE Index of international stocks has gained nearly 10% since step-down signs began emerging in October.  

There are signs that central banks worldwide are tilting toward downshifting the size of interest rate hikes aimed at combatting inflation and that could support a jump in global stocks, says Charles Schwab’s top global investment strategist. 

“There can be no guarantee that central banks will continue to step down the pace of their hikes or pause them, but if they do it is possible a “Santa Pause” rally could be in store for markets as the year draws to a close,” Jeffrey Kleintop, chief global investment strategist at Charles Schwab, said in a note published Monday. 

The Federal Reserve is among the central banks over the past week that has indicated a slower pace of rate increases. The Fed, after raising rates by 75 basis points for a fourth consecutive time, appeared to point to a hike of 50 basis points in December, and Norges Bank of Norway raised its policy rate by a lower-than-expected 25 basis points.

Kleintop said the Bank of England issued an “unusually blunt comment” stressing the peak in rates will be lower than what was priced into financial markets. BoE’s comment came as it kicked up its benchmark rate by 75 basis points, the largest increase in 33 years. 

Kleintop noted the MSCI EAFE Index of international stocks has gained nearly 10% since step-down signs began emerging in October. 

“Stock markets outside the U.S. that are outperforming the S&P 500 Index this year include many countries where the central banks are stepping down,” Kleintop said. 

Those markets include Brazil’s, with the Bovespa Index up 24% in US dollar terms in the year through November 4. Banco Central do Brasil last month left its key  Selic rate unchanged for a second straight meeting, at 13.75%. 

The S&P 500 through early November had lost 20% while Norway’s OBX and Canada’s S&P/TSX Composite Index had declines of 10% and 14%, respectively. The Bank of Canada last month unexpectedly raised its overnight rate by 50 basis points instead of an anticipated 75 basis points. 

Last month, the European Central Bank “sounded more cautious about the economy and eliminated the word ‘several’ from the number of hikes remaining,” said Kleintop. The ECB at its October meeting raised its key rate by 75 basis points.

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US stocks slip ahead of key Fed policy meeting

Jerome Powell Senate Banking testimony
Federal Reserve Chair Jerome Powell adjusts his tie as he arrives to testify before a Senate Banking, Housing and Urban Affairs Committee hearing, July 15, 2021.

  • US stocks edged lower on Monday, extending last week’s gains ahead of a key Fed meeting.
  • The Federal Reserve is scheduled to meet Tuesday and Wednesday and could quicken the speed of its tapering program.
  • Apple is less than 1% away from hitting a $3 trillion valuation milestone in early Monday trades.

US stocks slipped on Monday, opening the week lower after last week’s gains ahead of a key Federal Reserve policy meeting this Tuesday and Wednesday.

Investors will be watching whether Fed Chairman Jerome Powell announces a quickening of its monthly bond purchase tapering program, as it seeks to combat an ongoing rise in inflation. The Fed could also set investor expectations as to when it may begin to raise interest rates in 2022. 

Apple is on the verge of becoming the first company ever to hit a $3 trillion valuation on Monday. The iPhone maker’s stock price needs to hit $182.85 for the $3 trillion market valuation to be reached. Shares traded at $181.72 in early Monday trades.

Here’s where US indexes stood shortly after the 9:30 a.m. ET open on Monday:

JPMorgan said Apple’s upcoming budged 5G iPhone SE will help accelerate sales in 2022 and drive 17% upside in the stock to $210. The bank reiterated Apple as one of its top picks in a Monday note.

Arena Pharmaceuticals soared 97% on Monday after Pfizer agreed to acquire the biotechnology firm for $6.7 billion, or $100 per share. Arena Pharmaceuticals develops CAR-T technology and is developing a drug for ulcerative colitis.

They mayor of Miami is planning to take some of his 401(k) retirement savings in bitcoin as he continues to promote the city as a cryptocurrency haven. 

West Texas Intermediate crude oil dropped as much as 0.47% to $71.33 per barrel. Brent crude, oil’s international benchmark, fell as much as 0.52% to $74.76 per barrel.

Gold rose as much as 0.07% to $1,786.00 per ounce.

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US stocks jump as investors skirt inflation data showing prices rising at fastest pace in 40 years

Traders work at the New York Stock Exchange in New York, the United States, Nov. 20, 2018.
Traders working at the New York Stock Exchange.

  • Stocks pushed higher on Friday, on track for a weekly gain. 
  • Equities rose even as November’s annual consumer price inflation hit a 39-year high of 6.8%. 
  • The reading, however, was largely in line with Wall Street’s expectations. 

US stocks rose Friday and headed toward weekly gains as US consumer inflation kicked up to its highest rate in 39 years but was largely in line with expectations of prices staying hot. 

Wall Street’s major indexes gained ahead of the market open even as the Bureau of Labor Statistics said annual CPI rose to 6.8% year-over-year in November. The print was slightly above the consensus forecast of 6.7% from a Bloomberg survey of economists. The gains left the Dow Jones Industrial Average on track to rise by 3% this week. 

Here’s where US indexes stood at 9:30 a.m. on Friday:    

“While it’s not a number we’ve seen in almost 40 years, keep in mind the CPI read is pretty much in line with expectations. Many have felt the effects of inflation in their day-to-day, so this likely isn’t a huge shocker to the market,” wrote Mike Loewengart, managing director of investment strategy at E-Trade Financial, in a note. 

With Federal Reserve Chairman Jerome Powell recently “changing his tune” on the transitory nature of inflation and tapering on the horizon, most of the CPI reading has likely already been priced in,  Loewengart said. “Though with all systems go on the labor market front, and inflation running white-hot, the Fed is likely feeling the pressure to act.” 

The Federal Reserve’s rate-setting body will meet for the last time in 2021 next week. 

Around the markets, oil prices were mixed.  West Texas Intermediate crude lost 0.3% to $70.70 per barrel. Brent crude, the international benchmark, gained 1.1% at $75.21. 

Gold shed 0.1% to $1,772.57 per ounce. The 10-year yield lost 1 basis point, moving to 1.488%. 

Bitcoin rose by 0.3%, at $47,951.77.

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US stocks end 3-day win streak as investors reassess impact Omicron impact amid new restrictions

A trader sits in front of a computer monitor on the floor of the New York Stock Exchange.
Trader Leon Montana works on the floor of the New York Stock Exchange stocks NYSE worry

  • US stocks were mostly lower on Thursday, ending a three-day rally amid new virus restrictions.
  • The UK has imposed a new mask-wearing policy indoors as it expects a big surge in cases.
  • Meanwhile, weekly jobless claims fell to 184,000 last week, hitting its lowest level in decades.

US stocks finished mostly lower on Thursday, ending a 3-day win streak as investors digest new virus restrictions and weekly jobless claims data.

Seeking to prevent a surge in daily COVID-19 cases amid the spread of the Omicron variant, the UK is imposing new mask wearing restrictions in certain indoor settings, and is asking employees to work from home when possible.

Early studies suggest that the Omicron variant is much more transmissible than the Delta variant, and that three doses of Pfizer’s vaccine provide protection from the disease.

Weekly jobless claims were below economist estimates on Thursday, with 184,000 claims representing the lowest level since 1969. Continuing claims rose to 1.99 million for the week that ended November 27, missing estimates.

Here’s where US indexes stood at the 4:00 p.m. ET close on Thursday:

As cryptocurrency continues to grow in popularity, users of the ethereum blockchain are growing infuriated by the high transaction fees of ether. The problem could derail ether’s leading status and developers are rushing to fix the issue. Ether’s loss is a win for other cryptos, as its helping boost boost ether rivals like solana and avalanche. 

Ark Invest’s Cathie Wood believes bitcoin has a lot more gas left in its tank, as growing allocations by institutional investors could drive its price to more than $500,000. Wood also defended Ark Invest’s strategy of investing in innovative growth stocks. 

This year has been a wild ride for cryptocurrencies, including metaverse tokens and digital art that is valued in cryptos like ether. These are the 10 best performing crypto assets of 2021.

MicroStrategy is buying the dip in bitcoin, having added 1,434 bitcoin to its holdings over the past week. The average price paid was $57,477. Those purchases were underwater on Thursday, with bitcoin trading below $50,000.

All eyes were on original meme stock GameStop on Thursday, after the video game retailer announce third-quarter earnings that beat revenue estimates but missed profit estimates. The company disclosed an ongoing inquiry by the SEC, and the stock traded lower by about 3%.

Lumber prices rose 5% on Thursday, jumping above the $1,000 price level as demand for the essential building material remains steady amid ongoing supply chain issues. 

West Texas Intermediate crude oil dropped as much as 0.90% to $71.71 per barrel. Brent crude, oil’s international benchmark, fell as much as 0.91% to $75.13 per barrel.

Gold fell as much as 0.46% to $1,777.30 per ounce.

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US stocks slip after 3-day rally as investors assess new virus restrictions and jobless claims

Stock market Dow Jones trader New York
Stocks have risen sharply over the last year, helping the Dow Jones finally break the 36,000 barrier.

  • US stocks stumbled on Thursday as investors digest new virus restrictions and jobless claims data.
  • The UK has imposed a new mask-wearing policy indoors as it expects a big surge in cases.
  • Weekly jobless claims fell to 184,000 last week, hitting its lowest level in decades.

US stocks fell on Thursday after a 3-day rally erased last week’s losses as investors digest new virus restrictions out of the UK and jobless claims data.

Seeking to prevent a surge in daily COVID-19 cases amid the spread of the Omicron variant, the UK is imposing new mask wearing restrictions in certain indoor settings, and is asking employees to work from home when possible.

Early studies suggest that the Omicron variant is much more transmissible than the Delta variant, and that three doses of Pfizer’s vaccine provide protection from the disease.

Weekly jobless claims were below economist estimates on Thursday, with 184,000 claims representing the lowest level since 1969. Continuing claims rose to 1.99 million for the week that ended November 27, missing estimates.

Here’s where US indexes stood shortly after the 9:30 a.m. ET open on Thursday:

As cryptocurrency continues to grow in popularity, users of the ethereum blockchain are growing infuriated by the high transaction fees of ether. The problem could derail ether’s leading status and developers are rushing to fix the issue. Ether’s loss is a win for other cryptos, as its helping boost boost ether rivals like solana and avalanche. 

Ark Invest’s Cathie Wood believes bitcoin has a lot more gas left in its tank, as growing allocations by institutional investors could drive its price to more than $500,000.

This year has been a wild ride for cryptocurrencies, including metaverse tokens and digital art that is valued in cryptos like ether. These are the 10 best performing crypto assets of 2021. 

All eyes are on original meme stock GameStop on Thursday, after the video game retailer announce third-quarter earnings that beat revenue estimates but missed profit estimates. The company disclosed an ongoing inquiry by the SEC, and the stock traded lower by about 3%.

West Texas Intermediate crude oil dropped as much as 0.90% to $71.71 per barrel. Brent crude, oil’s international benchmark, fell as much as 0.91% to $75.13 per barrel.

Gold fell as much as 0.46% to $1,777.30 per ounce.

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US stocks trade mixed following massive rally on receding Omicron fears

Stock market Dow Jones trader New York
  • Major US stock benchmarks were mixed on Wednesday following a massive Tuesday rally.
  • Pfizer and BioNTech said data indicate a third dose of their vaccine neutralizes the Omicron coronavirus variant. 
  • The S&P 500’s rebound from the Omicron sell-off leaves the index up about 26% in 2021. 

US stocks were mixed on Wednesday after a big rally in the previous session as concerns about the impact of the Omicron coronavirus variant on the global economy ebbed. 

Stocks found some upside support with Pfizer and its partner BioNTech saying preliminary lab data show three doses of their COVID vaccine are effective at neutralizing the Omicron strain. The strain’s recent emergence triggered a selloff in stocks as health officials pointed out it was heavily mutated.

The Nasdaq Composite edged lower after a 3% rally on Tuesday, while the Dow Jones Industrial Average and the S&P 500 wavered at the open. 

The overall outlook for global equities is positive “with Omicron concerns almost entirely evaporating,” said Chris Beauchamp, chief market analyst at IG, in a note.

Here’s where US indexes stood at 9:30 a.m. on Wednesday:   

“With the Fed’s tapering and potential earlier rate hike also now firmly in the news, investors are able to look towards the future with a greater degree of confidence. At any rate, the rally that began last Friday seems set to continue, although the real ‘Santa rally’ should still kick in later in the month,” he said. 

The rebound in US stocks since Omicron was discovered has left the S&P 500 through Tuesday up by nearly 26% for the year.

Around the markets, Goldman Sachs CEO David Solomon doesn’t expect stocks to keep delivering the bumper returns investors have enjoyed in the last few years. 

Investment company First Trust filed for a metaverse-themed exchange-traded fund.

Oil prices rose. West Texas Intermediate crude picked up 0.1% to $72.09 per barrel. Brent crude, the international benchmark, gained 0.5% at $75.81. 

Gold edged up less than 0.1% to $1,784.93 per ounce. The 10-year yield rose 2 basis points to 1.493%. 

Bitcoin fell 2.8% to $49,236.08 ahead of a hearing on the cryptocurrency market on Capitol Hill.

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Nasdaq soars 3% as US stocks erase nearly all Omicron losses

Traders work on the floor of the New York Stock Exchange
Traders work on the floor of the New York Stock Exchange

  • US stocks soared on Tuesday as fears surrounding the Omicron virus faded.
  • Early data from GlaxoSmithKline shows that its antiviral drug retains activity against the variant.
  • Oil prices surged on Tuesday as investors now see little chance of Omicron disrupting the economic recovery from the pandemic.

US stocks surged on Tuesday, with the Nasdaq jumping over 3% and recovering all of last week’s losses as fears of the COVID-19 Omicron variant begin to recede to the back of investors’ minds.

Early data from GlaxoSmithKline is likely helping ease the concerns, as the drug maker said its antiviral treatment retains in vitro activity against the full Omicron spike protein. That data lines up with prior comments from Merck and Pfizer, with both saying last week they expect their antiviral pill to work against all COVID-19 variants.

With Omicron now seen as having a diminishing chance of disrupting the economic recovery from a global pandemic, oil prices surged about 2%. 

Here’s where US indexes stood after the 4:00 p.m. ET close on Tuesday:

Cathie Wood’s Ark Invest is having a tough year, as most of its fund strategies are in a bear market even as the broader stock market is less than 1% away from record highs. Six of Ark’s eight funds are in the red, with its flagship Disruptive Innovation fund down 24% year-to-date.

The recovery in cryptocurrencies was mixed on Tuesday following their steep weekend sell-off. Bitcoin is barely above $50,000 but certain metaverse tokens are surging higher, including Terra and Polkadot.

Katie Stockton of Fairlead Strategies urged caution to cryptocurrency investors that may want to buy the current dip, as she sees the potential for more downside ahead based on several technical indicators.

Congresswoman Alexandria Ocasio-Cortez isn’t participating in the crypto volatility, as she explained earlier this week that she doesn’t own bitcoin because she wants to be an unbiased lawmaker.

The boom in cryptocurrencies has fueled a surge in NFT sales this year, with total volumes surpassing $12 billion, and weekly sales hitting $293 million last week. These were last week’s top 5 digital art collection sales.

Shares of MongoDB soared as much as 21% on Tuesday after the cloud provider surpassed third-quarter earnings estimates. The company saw its Atlas revenue surge 84% as Coinbase migrates to its platform.

West Texas Intermediate crude oil jumped as much as 3.15% to $71.68 per barrel. Brent crude, oil’s international benchmark, rose as much as 2.82% to $75.14 per barrel.

Gold rose as much as 0.38% to $1,786.30 per ounce.

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Fundstrat lays out the scenario that would ruin its call for a 6% S&P 500 rally into year-end

A trader looks distressed while staring at a computer screen, with his hand on his head.
Traders on the floor of the New York Stock Exchange May 31,2019 in New York. – Wall Street stocks closed out a downcast May on an especially negative note on Friday, falling hard after President Donald Trump announced new tariff measures on Mexico. Major indices were in the red the entire session after Trump unveiled his latest trade broadside on Twitter Thursday night, vowing a string of gradual tariff increases to pressure Mexico into cracking down on illegal immigration into the United States. (Photo by Don Emmert / AFP) (Photo credit should read DON EMMERT/AFP via Getty Images)

  • Fundstrat’s Tom Lee expects the S&P 500 to rally 6% by year-end, according to a Monday note.
  • Lee points to de-risking among investors as evidence that a lot of bad news is already priced in.
  • There is one possible scenario that would derail Lee’s expectations of a year-end rally in stocks.

The Omicron variant of COVID-19 and Fed Chairman Jerome Powell’s hawkish pivot last week are two risks that have investors on edge, with the S&P 500 falling about 5% in a week.

But according to Fundstrat’s Tom Lee, much of the concern surrounding these two factors are already priced into markets, evidenced by a surge in de-leveraging among institutional money managers over the past few days.

“Hedge funds have dramatically de-risked on the dual risks of Omicron and Fed tapering,” Lee said, explaining that institutional investors have raised cash in each of the last 5 weeks and institutional cash on the sidelines now sits at more than $3.2 trillion, the highest level in all of 2021.

“Cash on sidelines = firepower. Sign of a bottom, not a top,” Lee said. But while Lee still expects the S&P 500 to surge 6% to 4,800 by year-end, there is one potential, though unlikely, scenario that could derail that projection, according to the note.

The “bad” scenario is Omicron turning out to be more lethal than anecdotal evidence suggests, combined with the Fed remaining hawkish and not walking-back prior comments to a more dovish stance.

Admittedly, this scenario only has a 2.5% cumulative probability, according to Lee, because the Fed is likely to become more dovish if Omicron does infact turn into a deadly threat that evades vaccines and shatters consumer confidence.

The more likely scenarios seen by Fundstrat is Omicron being a milder variant of COVID-19, and the Fed remaining either hawkish or pivoting back to a dovish stance. According to Lee, stocks can still rise in the face of a Fed that is rolling back its monthly bond purchases at an accelerated pace because interest rates are still historically low and the economy remains on strong footing. 

“While there was a lot of carnage in the past few weeks, this does not negate the probability of a strong equity rally into year-end. That remains our base case,” Lee concluded.

Potential scenarios for stock market into year-end
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US stocks trade mixed as investors assess reports Omicron variant causing ‘mild’ symptoms

Trader on the floor of the New York Stock Exchange
Trading on the floor of the New York Stock Exchange.

  • US stock were mostly higher on Monday as investors assess Omicron reports.
  • Reports indicate the new coronavirus variant is producing mild symptoms in patients. 
  • Bitcoin is stabilizing after a sharp selloff over the weekend. 

US stocks were mixed on Monday, with investors starting the week with reports about the severity of symptoms produced in patients infected with the new coronavirus variant Omicron. 

The S&P 500 and the Dow Jones Industrial Average clung to small gains while the Nasdaq Composite dropped. Investors weighed reports from South Africa and Japan that Omicron patients are largely experiencing mild symptoms. The variant was recently first identified in South Africa. 

“Omicron continues to be a concern, and while there’s still a lot more we don’t know than we do know about the latest strain, reports continue to suggest that despite the higher transmissibility, its impact has not been nearly as harsh,” said Bespoke Investment Group, in a note early Monday. 

Worries about rising cases of Omicron contributed to a selloff on cryptocurrencies over the weekend, but bitcoin was showing signs of stabilization.

Here’s where US indexes stood at 9:30 a.m. on Monday:   

Shares of Lucid Motors fell after the luxury electric vehicle maker revealed its been subpoenaed by the Securities and Exchange Commission. 

ConstitutionDAO, the group that tried and failed to win a copy of the US Constitution at auction, saw its People Token spike since disbanding

Oil prices jumped, with West Texas Intermediate crude up by 2.6% to $67.98 per barrel. Brent, oil’s international benchmark, climbed 2.1% to $71.43 per barrel. 

Gold fell 0.27% to $1,779.30 per ounce. 

Bitcoin fell 1.9% to $48,453.47.

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Resist the FOMO. An asset manager has created an ETF for ‘genuine investments’ that shuns market crazes like crypto and meme stocks.

Man looking at stocks on multiple computer screens against a green background with pixelated dollar signs, Bitcoin and Ethereum tokens and rocket ship emojis
  • A new exchange-traded fund from GCI Investors is getting back to the basics of investing. 
  • “We are investing in underlying businesses and companies rather than just stocks,” said Guy Davis.
  • His potential losses, he said, are much lower than risking investments on meme stocks and crypto.

One fund manager wants you to forget about the eye-popping gains from meme stocks and crypto and get back to the basics of investing.

“We sit very much at the opposite end of the spectrum to meme-stock investing,” said Guy Davis, managing director at Houston, Texas-based GCI Investors. “We are investing in underlying businesses and companies rather than just stocks.”

Two companies he likes are UK-based online-grocery delivery company Ocado, which has rallied 545% in the past five years, and waste-management company GFL Environmental.

“Waste is an incredibly unsexy industry,” he said. “Who would want to invest in a waste company when they can invest in a bitcoin mining company generating thousands of dollars in returns?”

But he said the level of stable returns from a waste management company — even during lockdowns spurred by the pandemic — is “incredible.” GFL went public in March 2020 when the pandemic was just starting. Since then, it’s risen 120% to about $37. 

“You’ve got a very solid industry, and you’ve got something individually wonderful happening at the company that is going to boost your return on top of that. It enables us to have a very high degree of confidence in the future,” he said.

The firm’s first exchange-traded fund, called the Genuine Investors ETF, launched December 1 under the ticker “GCIG.” Waste management and grocery delivery may seem like a tough sell next to the massive gains of meme stocks like GameStop and AMC, which have gained 152% and 1,200% so far this year respectively, or the nearly 100% gain in the price of bitcoin. That’s not to mention the eye-popping gains of 37,000% for some metaverse-related cryptocurrencies. 

But to someone who quickly became a bitcoin or meme-stock millionaire, Davis says, “Well done, fantastic news. Go and do something successful with it, because the chances of doing that again are infinitesimally small.”

He describes his investing approach as simplistic and old-fashioned. His Genuine Investors ETF holds 23 individual companies that the firm knows “inside and out” and that he said generally aren’t subject to outside risks like regulatory whims or commodities prices.

“The potential returns might be slightly lower, but our potential losses are far more contained,” he said. 

Davis said the stock market just provides opportunities, not information about companies. The S&P 500, he said, is no longer a measure of the largest companies but the “most popular” ones. Tesla, a favorite among retail traders excited about EVs and Elon Musk, is in the top five, he noted.

“The stock is huge; the company is tiny in terms of what it actually generates,” he said.

Davis said he knows what the companies he’s investing in are worth, unlike bitcoin, which he said nobody “has any idea whether it’s worth 50 cents or a billion dollars.”

 

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