Technology leads biggest stock rally since March

U.S. stocks saw their biggest rally in nine months, with key averages rising at least 2% as optimism on the Omicron coronavirus variant doesn’t stall global growth. Government bonds fell, catapulting two-year yields to their highest level since March 2020.

Technology stocks, which led last week’s decline, accelerated the rebound. The Nasdaq 100 index rose 3%, an ETF that tracks newly listed companies rose 5%, and small caps rose 2%. The Standard & Poor’s 500 index made up for all of the losses suffered after Jerome H. Powell’s hawkish tilt a week ago and was only 0.3% below its last closing price before the Omicron variant rocked the markets. The CBOE Volatility Index plunged five points to 22. The dollar fell and crude oil surged above $ 71 a barrel in New York.

Risky assets rebounded this week after initial data showed the surge in Omicron cases hasn’t overwhelmed hospitals and China scrambled to step up support to the economy. Among the riskiest assets, a basket of unprofitable tech companies from Goldman Sachs Group Inc. rose nearly 6% on Tuesday, making up almost half of last week’s losses.

“Market sentiment was much brighter this week after several health professionals around the world, including US Dr. Anthony Fauci, said the Omicron symptoms seem milder so far, “said Fiona Cincotta, senior financial markets analyst at City Index. “Although it’s just getting started, the encouraging news has spurred bargain hunters to action. Who would like to miss the possibility that a milder variant could accelerate natural immunity to COVID? “

On the data front, the US trade deficit narrowed while productivity fell in the third quarter. Private consumption made the largest contribution to the recent economy in the euro area extension. UK property prices reached an all time high. and China’s exports grew faster than expected to a record in foreign demand and a weakening power crisis.

In addition, research showed that a COVID-19 vaccine from GlaxoSmithKline and Canada’s Medicago Inc Effective against several variants of the disease. Congress has also reached an agreement around the Debt ceiling.

“This morning’s rally is fueled by a belief that the Omicron variant of the world economy will not cause many problems and that China has promised measures to support economic growth,” said Matt Maley, chief market strategist at Miller Tabak & Co. “If that were the case the reasons the market has seen such a sharp surge in volatility since Thanksgiving.

However, the stock markets could still be a long time coming turbulence amid new restrictions to the Spread of Omicron and renewed geopolitical tensions. The threat from Sanctions A call between US and Russian leaders on Tuesday still threatens a Russian invasion of Ukraine. China threatened the US with retaliation for its decision to explain diplomatically boycott of the Winter Olympics. And Treasury Secretary Janet L. Yellen said the US’s reliance on overseas supply chains has proven to be a weak spot, which could spur policies that might be considered protectionist.

Given the potential headwinds, George Pearkes, global macro strategist at Bespoke Investment Group, said the tech rally “feels really extreme”.

“Most of the time, this just feels like a countertrend move after some big negative catalysts and sentiment challenges hit the market in the past few weeks, but I’m surprised it’s that big,” he said.

– With the support of Bloomberg authors Abigail Moses, Andreea Papuc, Shen Hong, and Katie Greifeld.