U.S. markets and stock exchange traded funds rebounded Monday from the Omicron-induced pressure last week as traders were optimistic about the tentative indicators of the new variant triggering a milder illness.
The Invesco S&P 500 Equal Weight ETF (RSP), which follows the S&P 500 Equal Weight Index (EWI), rose 1.6% on Monday, testing its short-term resistance at the 50-day simple moving average. Meanwhile, the S&P 500 was up 1.3%, the Dow Jones Industrial Average was 2.0% higher, and the Nasdaq Composite rose 1.1%.
U.S. markets have been on a wild ride over the past week on conflicting signals from health experts and vaccine makers over the severity of the Omicron variant and how existing vaccines would react against it. While it may still be weeks before a definitive answer comes, the uncertainty has contributed to increased volatility and fears of another widespread global lockdown.
“Some of the news on the variant not being quite as severe as people had thought also has put a little bit of confidence in it,” JJ Kinahan, chief market strategist at TD Ameritrade, told Reuters.
On Monday, the technology sector lagged behind the broader market rally as investors appeared to be rotating away from the heavy growth segment.
“In the tech space, the promise of high double-digit growth is no longer enough,” James Gaul, portfolio manager and senior vice president at Knights of Columbus Asset Advisors, told the Wall Street Journal. “We’re seeing a situation now where investors are wary of any whiff of bad news. The higher the multiple, the more severe the damage if your story isn’t perfect.”
Kinahan pointed out that that some rotation was on the menu on Monday. Investors looked at value shares over growth and were also anticipating December 17’s big expiration of options and futures, or a “quad” witching.
“You have a lot of firms that have a double mandate right now. You are trying to take off risk, expiration related, while the same time rebalancing your portfolio heading into 2022,” Kinahan told Reuters.
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