In other parts of the world, inventories have fallen in Japan, as authorities consider a state of emergency due to the increase in cases of viruses. But optimism prevailed more in other markets. Most European and Asian stock indexes rose, while Treasury yields rose in a sign of rising expectations for economic growth and inflation.
The UK has been hit particularly hard by a new variant of the coronavirus that appears to be more contagious. On Monday, the United Kingdom became the first nation to start using the COVID-19 vaccine developed by the University of Oxford and pharmaceutical company AstraZeneca.
In the United States, regulators have already approved two other vaccines. China gave the green light last week for its first internally developed vaccine. Others are also being tested.
The hope in the markets was that vaccines would allow daily life around the world to slowly return to normal. This helped trigger a recent recovery for business actions related to travel, smaller companies and other industries left behind during much of the pandemic.
While rates of infection and hospitalizations are at alarming levels, many investors are betting that the ultra-low interest rates provided by the Federal Reserve and financial support for the economy recently approved by Congress can help balance the economy until vaccinations become more widespread. .
Governments may launch less stimulus to their economies than last year, but the policy “is still in a very loose environment”, which supports stock prices and loans, said JP Morgan Asset Management’s Kerry Craig in a report.
“Investors should look to the most difficult beginning of the new economic cycle and focus on the best profit prospects,” said Craig.
Of course, many risks remain for the market, even beyond the threat of economic blockages that will occur in the short term due to the violent pandemic. Prices have risen enough that critics say the shares may be too expensive, especially if the big recovery in corporate profits that investors expect to occur later this year does not materialize.
Politics is also still a wildcard. Two runoff runs in Georgia on Tuesday will determine which party controls the Senate.
More than 80% of the S&P 500 shares were falling on Monday. At the losing end of the market were several shares of Big Tech. Apple fell 2.4%, Microsoft fell 2.2% and Amazon lost 2.1%. Because they are so gigantic in size, Big Tech’s stock movements have much more influence on the S&P 500 than other companies. These three were the biggest drops in the index.
Momentum has eased for Big Tech’s stock, which skyrocketed at the start of the pandemic, as the shopping and homework trends that benefit them have increased. Many analysts expect stock market earnings to widen this year as the economy recovers, with Big Tech no longer moving away from the rest of the market.
Tesla rose 4% to one of the biggest gains for the S&P 500, after announcing that it delivered 499,500 vehicles last year. This represents a 36% jump in the year, although it fell short of CEO Elon Musk’s goal of 500,000, which was set before the pandemic.
In the European stock markets, France’s CAC 40 gained 0.7% and Germany’s DAX returned 0.1%. The FTSE 100 in London was up 1.8%.
In Asia, Tokyo’s Nikkei 225 lost 0.7% after Prime Minister Yoshihide Suga said a state of emergency was being considered for the Japanese capital and three neighboring prefectures due to the increasing number of virus cases.
Suga asked restaurants and bars to close at 8 pm and said it would be difficult to restart a travel promotion program that was suspended last month. He said the government will accelerate the approval of coronavirus vaccines and will begin providing injections in February.
South Korea’s Kospi rose 2.5%, Hong Kong’s Hang Seng rose 0.9% and Shanghai shares rose 0.9%.
In the bond market, the 10-year Treasury yield rose to 0.92% from 0.89% on Thursday night. The markets were closed on Friday for New Year’s Day.