Day Traders Diary

12/6/21

The major averages rose sharply to start the week with the Dow erasing its losses from the previous weeks, as investors shook off fears around the emerging threat of the omicron variant of Covid-19. The Dow Jones Industrial Average jumped 646 points or 1.87%. The S&P 500 rose 42 points or 1.17% while the Nasdaq Composite rose 139 points or 0.93%.

Leisure and hospitality stocks saw the biggest advances. United Airlines jumped 8% and American rose 7%. Major cruise lines gained between 10% and 11%. Shares of Wynn Resorts climbed 8% while Marriott and Hilton rose 4% and 3%, respectively. Travel booking stock Expedia added nearly 8%, and Booking Holdings rose 6%.

Those moves followed comments White House Chief Medical Advisor Dr. Anthony Fauci made Sunday, saying the initial data on the omicron variant is "encouraging." The comments came the same day CDC Director Dr. Rochelle Walensky told ABC News the new variant has now been discovered in at least 15 U.S. states, and less than two weeks after the World Health Organization designated it as being "of concern."

The Nasdaq, though higher, lagged the other major averages Monday, weighed down by healthcare and tech stocks. Moderna, the biggest decliner in the index, fell 15%. AMD and Nvidia were off by 4% and 3%, respectively, and Peloton was down 4%. Tesla also fell, by about 2%.

But as investors' fears about omicron faded, several high-priced tech shares that began the day in the red turned green. Craig Erlam, senior market analyst at OANDA, urged investors to stay cautious until more data can provide more cause for optimism.

Erlam also warned that the rest of this week could prove to be as volatile as the last.

But it was comments from the Fed that unnerved markets late last week, not fears about the omicron variant, according to Tom Essaye, author of the Sevens Report. Last week Chair Jerome Powell signaled the Fed's focus is inflation, even with the new variant emerging. That led investors to investors rotate out of tech and into sectors with better exposure to higher growth.

Essaye called the market behavior a "sort of Taper Tantrum 2.0 as markets react to a more hawkish Fed and rotate into sectors with more positive exposure to rising rates."

The central bank is likely to decide to double the pace of its taper to $30 billion a month at its meeting next week, CNBC's Steve Liesman reported on Monday, based on comments by Fed officials. Initial discussions could also begin as soon as the December meeting about when to raise interest rates and by how much next year.

U.S. Bank Wealth Management's Tim Hainlin said investors are also focused on what the terminal interest rate will be, and added he expects it to be lower that what investors are pricing in.

Bitcoin traded around $57,000 on Friday morning, but by Saturday had plunged to around $43,000. By Monday the world's largest cryptocurrency had clawed back some of its losses, last trading at around $49,035, according to Coin Metrics.