On Thursday, the U.S. stock market closed with significant gains due to a recovery in large, high-growth stocks that had performed poorly. Meanwhile, the price of crude oil dropped as concerns about a potential worldwide economic decline because of an increase in COVID-19 cases in China.
The three biggest U.S. stocks had a widespread rally on the second last trading day of the year. The technology-focused Nasdaq particularly excelled. In Europe, stock shares also increased, although concerns about the rapid spread of COVID-19 in China, the world’s second-largest economy, limited the trend of increased stock shares in Europe.
The S&P 500 index and Nasdaq Inc recorded their highest single-day percentage profits in a month, suggesting that the Federal Reserve’s interest rate increases have had their desired impact.
Impact of COVID-19 and Economic Factors on the Stock Market
According to Terry Sandven, an equity Strategist, the upward trend in stocks is a welcome sight. As stakeholders look to end the year 2022 and approach 2023 with renewed optimism, stocks continue to rise.
However, the recent spike in COVID-19 cases in China, following the easing of pandemic control measures in Beijing, has caused a decrease in risk appetite in other areas and put pressure on the dollar value and crude oil prices.
Throughout the year, investors have been concerned about the potential for a global recession due to rising interest rates implemented by central banks to combat inflation and the Ukraine conflict’s impact on global markets.
As a result, the three major U.S. stock indexes have experienced their largest annual losses since the worldwide financial upheaval of 2008. But, according to Sandven, while negative economic factors are still at play, there is a reason to be optimistic.
Valuations have decreased, indicating a higher potential return on investment in fast-growing sectors. In addition, the decline in business lending in the eurozone suggests that efforts by the Federal Reserve and the ECB to reduce demand and control inflation are ineffective.
Sandven stated that the impact of inflation in 2022 was significant, but the focus for 2023 would be the extent and duration of a potential recession. As a result, the Dow Jones Average, the S&P 500 index, and the Nasdaq Inc all saw increases, with the Dow rising 1.05% to 33,220.8, the S&P 500 gaining 1.75% to 3,849.28, and the Nasdaq Composite increasing 2.59% to 10,478.
Currency Values and Bond Market Performance on Thursday
In the bond market, the price of 10-year government securities rose 15/32, yielding 3.8296%, and the price of 30-year bonds rose 36/32, yielding 3.9142%. The dollar value decreased against other global currencies despite some relief in the labor market and some optimism about COVID-19 restrictions. The dollar declined by 0.54%, while the euro increased by 0.53% to reach $1.0664