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US stocks set for muted open after hitting record highs in holiday-thinned trade

Corner street signs during the 98th Annual Christmas Tree lighting ceremony at the NYSE on December 1, 2021.

Bryan R. Smith / AFP

  • US stocks were mostly flat Thursday, to trade around record highs in the last week of 2021.
  • “Markets are reflecting the new reality that COVID is here to stay,” an investment advisor said.
  • European stocks were muted after countries in the region reported a surge in COVID-19 cases.
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US stock index futures trod water on Thursday in light trading on the second-last day of the year after notching another all-time high in a choppy session.

Futures on the Dow Jones and S&P 500 rose about 0.05%, while those on the Nasdaq rose 0.1% as of 4:00 a.m. ET, suggesting a modest open later in the day. Biogen soared 13% on Wednesday.

White House chief medical adviser Dr Anthony Fauci said Wednesday that the latest COVID-19 wave in the US, where Omicron is now the most common variant, could peak by late January. The seven-day average for infections hit 277,241 on Tuesday, putting the US on track to break its previous average record of 250,437 daily cases set in January, CDC data showed.

“Despite global surges in COVID cases, the markets are reflecting the new reality that COVID is here to stay, albeit more on our terms than its,” said Kevin Philip, managing director at Bel Air Investment Advisors. “With vaccines, boosters, treatments, and rising herd immunity, it seems more and more like a manageable virus in line with colds and flus than what it originally was.” 

US data later in the day is expected to show a fall in initial jobless claims below 200,000 for the week, which is likely to reinforce the bullish sentiment dominating markets.

Elsewhere, the UK reported a daily record of 183,037 cases on Wednesday, and France hit a new record in Europe after detecting 208,000 cases.

But there should be room for some optimism given that Omicron appears to be replacing Delta, Joshua Mahony, senior market analyst at brokerage IG, said.

“While heightening the chance of short-term restrictions, the rapid spread, mild outcomes, and apparent ability to replace the deadlier Delta variant means Omicron could in fact bring a swifter return to normality,” he said.

London’s FTSE 100, Frankfurt’s DAX, and the Euro Stoxx 600 were about flat in early trade.

Asian equities traded mixed after reports about embattled developer Evergrande once again missing two offshore bond payments on Tuesday, and tightening COVID-19 measures in the Chinese city of Xian.

The Shanghai Composite gained 0.6% and Hong Kong’s Hang Seng added 0.1%. Tokyo’s Nikkei lost 0.4%.

Still, the market could face entirely different challenges in 2022, according to John Hardy, head of FX strategy at Saxo Bank.

“While wrapping up a very impressive 2021 indeed, US equities may find the environment next year somewhat more difficult, with rising wages and inflation possibly weighing on margins and earnings growth, and the risk of tighter Fed policy putting pressure on valuations, especially if longer Treasury yields pick up next year,” he said.

Read More: ‘Nothing is more supremely irritating than watching your neighbors get rich’: Legendary investor Jeremy Grantham breaks down the psychology of investing in bubbly assets like Dogecoin — and shares where long-term investors can find cheap assets

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