NEW YORK, Dec 30 ― US stocks closed sharply higher yesterday, powered by a rebound in recently battered mega-cap growth stocks, while crude oil prices declined as a surge of Covid cases in China exacerbated fears of global economic downturn.
All three major US stock indexes jumped in a broad-based rally on the penultimate trading day of the year, with the tech-heavy Nasdaq out front. European shares also advanced, but gains were held in check by worries over spiking Covid cases in China, the world's second largest economy.
The S&P 500, up 1.7 per cent and the Nasdaq, up 2.6 per cent, notched their biggest one-day percentage gains in a month, boosted as rising US jobless claims suggested the Federal Reserve's interest rate hikes have been having their intended effect.
“It's nice to see green on the screen,” said Terry Sandven, Chief Equity Strategist at US Bank Wealth Management in Minneapolis. “Stocks are trending higher as investors look to put a wrap on 2022, while approaching 2023 with a renewed sense of optimism.”
Spiking cases of Covid-19 in China, in the wake of Beijing easing its pandemic-curbing restrictions, curbed risk appetite elsewhere, pressuring the dollar and weighing on crude prices.
With central banks hiking interest rates to fight inflation and the war in Ukraine roiling global markets, worries about global recession preoccupied investors this year. Wall Street's three major stock indexes notching their steepest annual percentage losses since 2008, the nadir of the global financial crisis.
“While macro headwinds remain, there is reason for optimism,” Sandven added. “Valuations have been reset lower, implying an improved risk-reward profile, particularly among growth oriented sectors.”
A sharp decline in euro zone business lending offered further evidence that rate hikes by the Fed and the European Central Bank are succeeding in curtailing demand to cool inflation.
“Performance in 2022 was largely impacted by the duration and magnitude of inflation,” Sandven said. “2023 will be all about the magnitude and duration of recession.”
The Dow Jones Industrial Average rose 345.09 points, or 1.05 per cent, to 33,220.8, the S&P 500 gained 66.06 points, or 1.75 per cent, to 3,849.28 and the Nasdaq Composite added 264.80 points, or 2.59 per cent, to 10,478.09.
The pan-European STOXX 600 index rose 0.68 per cent and MSCI's gauge of stocks across the globe gained 1.26 per cent.
Emerging market stocks lost 0.28 per cent. MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.52 per cent lower, while Japan's Nikkei lost 0.94 per cent.
US jobless claims data boosted prices in the bond market, and benchmark Treasury yields softened after three days of gains. Ten-year notes rose 15/32 in price to yield 3.8296 per cent, from 3.886 per cent late on Wednesday.
The 30-year bond rose 36/32 in price to yield 3.9142 per cent, from 3.977 per cent late on Wednesday.
The dollar lost ground against a basket of world currencies after jobless claims data suggested some easing in the tight labour market, even as optimism over Beijing's relaxed Covid restrictions reopening was dampened by a wave of new Covid cases there.
The dollar index fell 0.54 per cent, with the euro up 0.53 per cent to US$1.0664 (RM4.73).
The Japanese yen strengthened 1.12 per cent versus the US currency at 133.00 per dollar, while sterling was last trading at US$1.2065, up 0.43 per cent on the day.
Crude oil prices slid due to uncertainties surrounding the wave of Covid infections in China, but its losses were held in check by strong US demand.
US crude shed 0.7 per cent to settle at US$78.40 per barrel, while Brent settled at US$82.26 per barrel, down 1.2 per cent on the day.
Gold advanced, bolstered by the dollar's weakness.
Spot gold added 0.6 per cent to US$1,814.94 an ounce. ― Reuters
