Top 10 Stocks for 2022

By Nicholas Jasinski |  Tuesday, December 21 Vol. Stock indexes followed up yesterday's losses with solid gains across the board today. The reopening trade was back in vogue today, as several of the Covid-19 sensitive names that took the brunt of recent weeks' declines ripped higher. The Omicron variant of Covid-19 is helping push daily new case counts to record highs in some parts of the country. But as President Joe Biden said this afternoon, "this is not March of 2020." Widespread lockdowns and harsh restrictions on travel and in-person activities are highly unlikely. Investors are already looking past the Omicron wave and to the next rebound on the other side. United Airlines Holdings stock jumped 6.9%, Carnival surged 8.7%, Hilton Worldwide Holdings rose 5.8%, Live Nation Entertainment soared 6.9%, and Cinemark Holdings gained 3.7%.  The Dow Jones Industrial Average finished the day up 1.6%, the S&P 500 climbed 1.8%, and the Nasdaq Composite added 2.4%. Oil prices also bounced back from recent declines, with West Texas Intermediate crude rising 3.7%, to $71.12 a barrel. We're entering a funky stretch of the year for markets. Trading volume tends to decline in late December as investors take holiday breaks. That can be a recipe for daily moves that are more volatile than normal. "Wall Street just seems easier to spook," Barron's Jacob Sonenshine wrote today. Omicron headlines, Federal Reserve commentary, the latest on spending and tax legislation from Washington, D.C.—all those factors have resulted in oversized daily moves from stock indexes in the past few weeks. And the near term could bring plenty more of that. The bond market is also sending the signal that volatility could be on the rise. Jacob writes: One indicator that makes the case for volatility: Credit spreads are getting wider.   First, what that means: The price of corporate bonds has fallen enough that the bonds now yield an even higher interest rate than risk-free government bonds. That’s because investors demand those higher yields since companies now have a slightly greater risk of not generating enough profits to cover their debts. Investment grade bonds in the U.S., altogether, now yield around 1 percentage point more than government bonds, according to Wells Fargo, up from 0.8 percentage points at the lows during the pandemic era.  Now, why that matters: There’s a historically tight correlation between credit spreads and stock market volatility, according to Wells Fargo. Wider credit spreads not only indicate weakening confidence in corporate profits, but they also force stock valuations lower because companies must borrow money at higher interest rates. 'History suggests flat-to-widening credit spreads should coincide with more frequent negative sessions,' wrote Christopher Harvey, head of equity strategy at Wells Fargo.  Daily moves of several hundred points on the Dow or more than a percentage point in the S&P 500 are a recipe for higher blood pressure among investors. But with that stress comes opportunity as well: If low-volume knee-jerk reactions drag down broad indexes, it could be an opportunity to scoop up attractive stocks that investors had been eyeing, at discounts.

 

DJIA: +1.60% to 35,492.70 S&P 500: +1.78% to 4,649.23 Nasdaq: +2.40% to 15,341.09 The Hot Stock: Citrix Systems +13.6% The Biggest Loser: General Mills -4.0% Best Sector: Energy +2.9% Worst Sector: Utilities -0.1%