1. Moving the markets

Despite some early wobbling, with the major indexes dipping below their respective unchanged lines, dip buyers stepped in late in the session and drove equites to a green close. The rebound effort was led by the Nasdaq with a 0.64% gain, while the Dow lagged but managed to advance by a tiny 0.10%.

The positive mood was the result of traders viewing the influence of the Omicron variant not as frightening as originally thought, thereby crossing one item off the worry list—that is for the time being.

Aiding the late afternoon rebound were announcements by Pfizer and BioNTech saying that “three doses of their vaccine are effective at neutralizing the omicron variant,” according to their own lab tests. They also pronounced that taking two doses still protect against the disease.

The award for the most chaotic roller coaster ride of the day goes to SmallCaps, which pumped, dumped and pumped and outperformed. Bond yields took an early dive, recovered, and stormed higher with the 10-year ending the day at 1.52%.

The US Dollar took a drop today by losing 0.48%, which allowed gold to built on yesterday’s bounce-back. The precious metal also was stuck on a wild ride, gave up mid-session gains, and closed just about unchanged.

I will be out tomorrow but will be back on Friday to write the week ending commentary.

1. Moving the markets

Yesterday’s strong recovery set the tone for further advances, as the bulls proved to be the dominating force after the opening bell rang. There was no hesitation as to the direction with higher prices being in clear focus for this session.

As a result, it was a one-way street with buyers being in charge because of lessening fears of any potential negative economic impact caused by the Omicron variant. In the absence of such worries, at least for this day, the major indexes stormed higher with especially the beaten down Nasdaq sporting a solid comeback of over 3%.

The revival was broad based, but it remains to be seen if any reappearance of Omicron headline news will keep traders in the game, or if we’ll be heading back from a one-way street to a two-way street.  

“Growth” trounced “Value” by a huge margin with RPG gaining 3.58% vs. 1.43% for RPV. SmallCaps had a good showing too with VBK gaining 3.12%.

Posted Zero Hedge:

Omicron’s ability to evade vaccine and infection-induced immunity is “robust but not complete,” said the research head of a laboratory at the Africa Health Research Institute in South Africa.

That news item took the starch out of upward momentum late in the day, with markets dipping and then ripping, a phenomenon that was especially apparent and unexplainable in the Nasdaq due to the index gaining 100 points in 4 minutes. Huh?

Of course, none of the above would be possible without solid support from another short squeeze, which was simply a continuation of yesterday’s ramp.

Bond yields rallied with the 10-year digging itself out of a deep hole for the second day in a row. The US Dollar danced within its recent trading range but closed slightly lower. Gold ended near its intra-day highs and gained a modest 0.30%.

It was another good day for the bulls. Is this the much hoped-for Santa Claus rally?

1. Moving the markets

After wild rides in the markets last week, which saw early rallies wiped out later in the session, we finally witnessed an opening surge that improved throughout the day and did not peter out in the afternoon. Sure, momentum slumped a little into the close, but that can be expected.

In the process, the Dow managed to erase all last week’s losses, while the S&P 500 just fell a fraction short. MarketWatch summed up today’s influencing forces like this:

• Shares linked to the economic reopening gained in Monday trading, including energy, industrials, and airlines.
• Investors continued to sell tech stocks with relatively high valuations. Those shares dragged the market down to a losing week on Wall Street last week.
• The 10-year Treasury yield rebounded after falling last week amid the omicron threat.
• There’s a major shift underway at the Federal Reserve to bring about a faster end to its pandemic easing policies.

The Nasdaq lagged the other two major indexes as the health care and tech sectors were weighing down the indicator, with Moderna being the biggest decliner by shedding 15%.

Anxiety about the new Omicron variant remains, despite continuous reports of its symptoms being less severe, but fearmongering in the MSM seems to be always in high gear. It appears that any economic data are playing second fiddle to the latest headlines dealing with Covid 19 or its variants.

Finally, the short squeeze came back to life again, after being suspiciously absent during last week, and gave a much-needed assist to insure the rebound would not run out of steam.  

Bond yields surged after an early dump, with the 10-year eking out a small gain and closing the session at 1.48%. The US Dollar went sideways for most of the day but ended up higher by a modest 0.19%.  

Gold drifted lower after Friday’s strong rebound with the precious metal giving back 0.24%, while still attempting to permanently conquer its much fought for $1,800 level.

I expect the recent volatility to stay with us, especially when on Friday the much-anticipated US CPI will be released.