Futures on US stock indices rose sharply in trading on Tuesday after yesterday's good bounce up. This happened because investors have become less seriously afraid of the potential impact of the new strain of the omicron coronavirus on the global economy. A sharp decrease in concern occurred after several scientists significantly reduced the risks of serious consequences of infection with a new strain, compared with delta and primary COVID-19. It is expected that even if quarantine measures are introduced in the United States, they will last relatively short. This became the main driver of investor sentiment growth, which returned demand for risky assets in anticipation of the Santa Claus rally at the end of the year. Futures on the Dow Jones Industrial Average rose by 345 points. S&P 500 futures jumped 1.3% and Nasdaq 100 futures gained 1.8%.
Yesterday's trading day closed in positive territory. The Dow blue-chip index rose by almost 650 points, and the S&P 500 jumped by 1.1%. The Nasdaq Composite turned up and rose by 0.9% at the end of the day. The leaders of the rally were travel-related companies. The shares of airlines and cruise line operators recovered the most.
Although now there is a weakening of concerns about the new strain of Omicron, now it is giving way to a more aggressive position of the US Federal Reserve, which we will learn about next week. But while the meeting is still a week away, investors are betting that the new COVID-19 strain will lead to milder diseases without serious consequences. The White House's chief medical adviser, Dr. Anthony Fauci, said yesterday that initial data on the new strain is "encouraging," although he cautioned that it takes time and additional information to fully investigate it.
The market's optimism partially negates the likelihood that the Federal Reserve will begin to wind down its easing policy introduced during the first wave of the coronavirus pandemic, as well as raise interest rates earlier than expected. Recent comments from Fed officials indicate that the Central Bank will probably decide to halve its bond purchases to $30 billion a month at its December meeting next week. Traders expect that discussions will also begin on when and how much to raise interest rates next year.
Now investors are at a crossroads: on the one hand, the recent "roller coaster" in the market has pretty frayed nerves, on the other — a similar picture was observed in September of this year, after which the market continued its upward rally, updating historical highs. Most likely, investors will focus on new inflation data later this week. The consumer price index is expected to be higher than in the previous month, which could be a catalyst for the Fed to wind down its bond-buying program and tighten policy.
Let's run through the premarket and talk about the news:
Tesla's shares rose almost 4% in the premarket, despite the news that the company had to replace cameras in some of its car models. UBS said that the electric car manufacturer will be the dominant force in the industry, and raised the target price, which led to increased demand for the company's securities, especially after the 9.0% drop that was observed recently.
The shares of chip manufacturers also showed a fairly strong upward trend: Intel jumped by 8.4%, and NVIDIA by 3.7%. This happened after the news that Intel plans to bring its Mobileye self-driving car division to the market in mid-2022.
As noted above, the securities of companies in the entertainment and tourism business have begun to be in special demand. Las Vegas Sands shares rose 3.4%, while cruise companies also added on the enthusiasm that Omicron may pose less of a threat than previously thought. Shares of Carnival and Norwegian Cruise Line Holdings rose by about 3.5%.
As for the technical picture of the S&P 500
Now traders are aiming for a breakthrough of a fairly large level of $4,654. Going beyond this range will open a direct road for the trading instrument to the area of highs: $4,718 and $4,750. In case of renewed pressure on the market today, the nearest support is seen in the area of $4,599, and a larger level for purchases will be in the area of $4,551.
