by Daniel Shvartsman
Investing.com - The party hats are about to come out as we hit the last day of trading for 2021. Who will be celebrating? With stock futures pointing lower amidst light holiday week trading volume, oil also taking a breather, and the world hoping that this may be the last New Year's Eve where Covid is a loud guest, it may just be enough to reach the finish line. Here's what you need to know in financial markets on Friday, December 31st.
1. U.S. Stock Futures May Be Partied Out
Thursday's U.S. trading session closed on an off-note, with each of the major indices closing down for the day, and Friday's pre-market session seemed poised to follow that. At 7:15 AM ET (1215 GMT) on Friday, Dow Futures were down 110 points, or -3%. S&P 500 Futures traded down 14 points or .3%, and Nasdaq 100 Futures traded down .34%. Small cap index Russell 2000 Futures were down .5%.
The indices are still poised to finish higher for the week, with slow trading volume and not much resistance making for a typical holiday finish. They will certainly finish higher for the year, with each of the main indices up more than 20% for the year on a total return basis.
Read also: Energy Leads S&P 500's 2021 Winners; Gambling, Gaming, and Payments Among Losers
2. Oil dips but still poised for best year since 2009
Oil was pointed lower in the pre-market session, with Crude Oil WTI Futures down 1% to $76.2/barrel, and Brent Oil Futures down .9% to $78.8/barrel. Oil is still on track for its best year since 2009 as resurgent demand and limited production rises helped support demand for the commodity. An inflationary climate and supply chain bottlenecks was a boon for commodities more widely, with US Coffee Futures up 77% for the year and Natural Gas Futures up 43%.
Of course, there are still concerns that demand may not get all the way back to 2019 levels, which is where the next item comes in.
Read also: 5 Key Factors To Watch For Oil In 2022
3. Airlines continue holiday week cancellations
A long week of cancellations due to covid cases, weather, and reluctance to deal with unruly passengers has led to a disruptive holiday schedule for airlines and travelers. As of this morning, flight tracking website FlightAware reported that over 1,000 flights in, into, or out of the United States were canceled, while nearly 500 were delayed. Airline stocks have mostly weathered the storm this week, as investors seem to be betting on the disruption being short-lived, but it serves as a reminder that getting back to whatever normal one might have in mind will not be a straight line in the year ahead.
4. Cryptocurrencies and Gold set to finish 2021 on a strong note
Two asset classes viewed as hedges to inflation and alternatives to equities and bonds are poised to finish the year on a strong note. Gold Futures is trading up .35% to 1820.35/oz, while Bitcoin is up 2.2% and Ethereum up 2.1% for the day. While they are trading in line today, the two asset classes have seen their fortunes diverge over the course of the year, with Bitcoin up 63% for the year in USD terms, Ethereum up 404%, and gold down 4% for the year, its worst performance in six years.
How the hedges perform in 2022 will obviously hinge in part on how much inflation persists and how quickly the Fed takes action to address that inflation, and thus how attractive the more classic asset classes are in relation. Sentiment will as always be a major driver for cryptocurrencies and gold as well, and 2021 is a win in the newcomer's favor as it stole some of the yellow metal's thunder this year as the leading anti-establishment investment option.
Read also: 5 Cryptocurrencies Beyond Bitcoin To Keep On Your Radar In 2022
5. Covid Cases Continue to Set Records, but Hope Persists that Omicron will be mild
We can't end 2021 without thinking about Covid, as cases worldwide spike to new reported records driven by the new omicron variant of Covid-19. The variant, first reported in South Africa at the end of November, has driven cases to new heights around the world, and the increase of at-home testing and questions over whether rapid tests are accurately detecting the variant suggest that case counts are underreporting by a meaningful number.
The good news so far is that hospitalizations are rising, but much more slowly, and that deaths from Covid are dropping worldwide and not seeing a spike. Many in the investing community are betting on either an end of the pandemic scenario - where omicron resembles a common cold and provides immunity against other variants, leading to an endemic virus - or at least a quick spike and then drop. News out of South Africa has so far supported that view, as the government continues to ease limits there. And the U.K. today approved the use of Pfizer (NYSE:PFE)'s pavloxid, an antiviral pill to combat Covid-19, for people over 18, another sign of improved treatment for the effects of the virus.
While it remains too early to tell, investors and people around the world can't be blamed for hoping this is the last December 31st where COVID is a headline event.
Read also: Investing.com's 2022 Market Outlook series
Wishing you a prosperous, healthy, and happy 2022!