Stocks Rally on a Wave of Good News. Next Stop: New Year’s.
The stock market has come a long way from the correction fears of September. Above, the ball drops to ring in the new year in a lonely Times Square on January 1, 2021.
Corey Sipkin/AFP/Getty Images
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It doesn’t get any better than this for the stock market—and that means it’s time to bet on a rip-roaring rally into the end of the year.
Everything went right that could have gone right this past week. The Federal Reserve did exactly what everyone thought by announcing plans to start winding down its bond-buying program but insisting that it would leave interest rates unchanged. The Bank of England, surprisingly, left rates unchanged. And October’s jobs report was stellar, showing a pickup in private-sector hiring and a big drop in the unemployment rate.
It didn’t stop there. Covid continued to fade into the background, at least as a market driver, after the Centers for Disease Control and Prevention recommended that children ages 5 to 11 get vaccinated and
Pfizer
(ticker: PFE) announced that its antiviral appeared to work better than
Merck
’s
(MRK), based on preliminary data. Even the bipartisan infrastructure plan seemed headed for a vote in the House around the time this column was written, something that wasn’t a given a week ago.
The stock market loved it. The
Dow Jones Industrial Average
rose 508.39 points, or 1.4%, this past week, while the
S&P 500
gained 2%, and the
Nasdaq Composite
climbed 3.1%. The small-cap
Russell 2000,
up 6.1%, left them in the dust.
The market has come a long way from the correction fears of September. Back then, everything that could go wrong was going wrong. Higher input costs and rising wages were supposed to hit corporate profit margins, economic growth was supposed to stagnate while inflation soared, and the market was “due” for a big pullback. Instead, after a 5% drop in September—the S&P 500’s first in 227 trading days—the index has rallied 9.9% and is now up 3.5% from its Sept. 2 high. Is that a reason to sell? Hardly. “[There’s] probably a good bit of performance chasing going on as well,” writes Chris Senyek, chief investment strategist at Wolfe Research. “We see more upside from now to year end.”
It’s been a strange rally, however, observes Christopher Harvey, U.S. equity…
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