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Nasdaq 100 the Frontrunner on Turnaround Tuesday. Is the Santa Claus Rally On?

Nasdaq 100 the Frontrunner on Turnaround Tuesday. Is the Santa Claus Rally On?

Brendan Fagan, Contributor


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Nasdaq 100, Dow Jones, S&P 500, Omicron, Semiconductors– Talking Points

  • Nasdaq 100 gains over 2% as semiconductor names roar higher
  • Dow Jones buoyed by rising Treasury yields, strong Nike earnings
  • S&P 500 closes 1.8% higher on rebound in travel, leisure stocks

The Nasdaq 100 Index rebounded sharply on Tuesday as equity benchmarks bounced following their worst 3-day decline since September. The Dow gained 1.6%, while the S&P 500 rose 1.8%. Semiconductor names pioneered the charge in the Nasdaq 100, with Micron and AMD surging 10% and 6.2%, respectively. The risk-on sentiment was further buoyed by strong gains in oil, with WTI advancing by roughly 3%.

US President Joe Biden said in remarks that there remains a chance to strike a deal with Senator Joe Manchin over an economic spending bill. President Biden also commented on the state of the pandemic, noting that the U.S. will not be returning to 2020-style lockdowns. Markets were shaken last week after the CDC announced that Omicron was the cause of 73% of new infections, making it the dominant strain in the U.S.

Nasdaq 100 Index 1-Hour Chart

Chart created with TradingView

The question remains whether Tuesday’s rally represents a temporary bounce from oversold conditions or the beginning of the famed “Santa Claus Rally.” The uncertainty surrounding the Omicron variant makes the near-term more difficult to predict, with historically light volumes heading into the new year already pointing toward potential volatility.

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The unwinding of risk-off bets was there to be seen in the US 10-year Treasury market, as yields flirted with the 1.50% handle after trading down to 1.36% just last week. Bonds appeared to have been overbought in a panic as market participants interpreted how Omicron may slow global growth prospects. With the World Health Organization stating that Omicron is more contagious than any previous variant of Covid, these fears and sudden gyrations in the market may be here to stay.

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--- Written by Brendan Fagan, Intern

To contact Brendan, use the comments section below or @BrendanFaganFX on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.