A rally that propelled markets over the past few days took a breather on Tuesday, but with only three sessions leftin 2021, stocks are still poised to close out a strong year. The S&P 500 is up 27.4% YTD, and if an outsized rally ensues, it could possibly top 2019's advance of 28.9% for its best year since 2013 (when it gained 32.4%). At the current rate it would also come out ahead of the tech-heavy Nasdaq Composite, which isup 23.1% for the year.
Quote:"All the stay-at-home, play-at-home, work-from-home stocks were DOA in 2021, like the pandemic didn't exist anymore," said Jake Dollarhide, CEO of Longbow Asset Management. "The last five years, every time it looked like there would be a rotation out of tech, everybody bought the dip - 2021 will go down as the year that investors did not buy the dip in tech."
Inflation scares also saw investors rotate away from high-multiple tech stocks and into sectors that hold up better in a rising rate environment. Those include financials, energy and consumer goods, as well as industrials and real estate. While smaller-cap tech stocks got hammered - along with small-caps in general - big growth players found their footing and kept the S&P 500 and Nasdaq powering higher (the Dow Jones Industrial Average is also up 20.4% in 2021). Mega-cap companies like Amazon, Alphabet, Apple, Meta, Microsoft, Nvidia and Tesla make up 27% of the S&P 500 and are also the largest members of the Nasdaq.
No day off:Traders might be surprised they won't be getting vacation time for New Year's this year due to an obscure regulation called NYSE Rule 7.2. The law stipulates that the exchange will be closed either Friday, or the following Monday, if a holiday falls on a weekend, unless "unusual business conditions exist, such as the ending of a monthly or yearly accounting period." It's a pretty rare occurrence, with Rule 7.2 making its last appearance a decade ago, when New Year's Day fell on a Saturday in 2011.