Stocks extended their Santa Claus rally on hopes the Omicron variant will not cause serious economic damage next year, even if the number of cases skyrocketed around the globe. The S&P 500 rose +0.85% week-over-week amid thin trading volumes and low volatility (VIX down 4% at 17.2), after hitting an intraday record high of 4,809 on Thursday. The Dow Jones Industrial Average gained 388 points at 36,338.30, or +1.08%. The Russell 2000 edged up +0.17%.

International stocks performed in line with their U.S. counterparts. The MSCI World added +0.78%. In Europe, The MSCI EMU jumped +0.96%. In Asia, the Shanghai Composite was up +0.60% while Japan?s Nikkei treaded water (+0.03%) after three positive weeks.

Gains in almost all sectors  

Unlike last week, defensive sectors such as real estate (+3.69%), utilities (+2.64%) and consumer staples (+2.48%) were the biggest gainers in the last few days of December. Consumer discretionary (+0.42%) lagged behind as Amazon plunged -2.54%. Furthermore, Tesla vaulted (-0.96%) after the EV maker announced that nearly half a million cars must be recalled due to safety issues. Information technology (+0.47%) and financials (+0.60%) also underperformed the broad market, but it was tougher for communication services (-0.79%), the only S&P sector in the red, pushed lower by ViacomCBS (-1.30%), Google (-1.67%), Netflix (-1.90%), Twitter (-2.13%), and Discovery (-3.60%).

Treasury yields edged higher

U.S. Treasuries continued to stay firm ahead of New Year?s Eve. The 10-year T-note yield closed at +1.52% (+3bps over the week). In Germany, the 10-year Bund yield followed suit, jumping 7bps from -0.25% to -0.18%. In the same way, the French OAT yield rose from +0.12% to +0.20%, the highest level in two months.

Corporate investment grade bonds closed mixed (-0.29% in Europe, +0.30% in the U.S.). In the high-yield space, the trend remained positive on both sides of the Atlantic for the fifth straight week (+0.03% in Europe, +0.21% in the U.S.). Emerging debt fell -0.34% in local currencies though the greenback weakened (dollar index down -0.89%). Elsewhere, gold extended its winning streak to a fourth week (spot price at$1,829.20, or +0.65%).

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