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The Dow Hits an all-time Record as Factory Activity Drops, OPEC+ is Set to Increase Output & USDJPY at 5-Year High

Dow at record, but S&P 500 and NASDAQ down, as U.S. factory activity drops

The Dow set an all-time record closing up 0.59% to 36,799.56.

However, the S&P 500 was down by 0.06% to 4,793.54 on Tuesday, as figures released in the United States showed that factory orders slowed in December. 

Data from the Institute for Supply Management reported that its U.S. factory activity index dropped to a reading of 58.7 in December.

This fell from a final reading of 61.1 in November and was the lowest number since January 2020.

In the United States manufacturing currently accounts for about 12% of the economy and is a big contributor to overall GDP.

Looking at the tech-heavy NASDAQ the index fell by 1.33% to 15,622.72 as the continuing increases in bond yields have encouraged traders to rotate out of tech stocks.

Santa found the Dow and S&P 500, but the NASDAQ just missed the party

Tuesday marked the end of the Santa Claus Rally for this year.  The period covering the last five trading days of the year and first two days of the New Year has traditionally been a strong one for stocks.

During this year’s Santa period the Dow closed at a new all-time high up 2.36%, while the S&P 500 was up 1.43% and set and set a new intraday high.  The S&P 500’s gain was slightly higher than the 1.3% gain that has been seen on average for the index over this seven day span since 1969.

The NASDAQ failed to join the party as it was off 0.20% as tech stocks faded slightly compared to the rest of the market.

OPEC+ agrees to increase February oil output

On Tuesday, OPEC, and its allies, including Russia, agreed to increase oil production starting from February.

The cartel agreed to raise production by an additional 400,000 barrels per day, which will be on top of the 400,000 barrels increased last August.

This latest hike comes as producers within the cartel missed their output targets by 730,000 bpd in October and by 650,000 in November.

💡 Geopolitical interest
In a world of uncertainty, investors will look to geopolitical wildcards for possible influences in the energy markets.

With prices hovering above $80 USD a barrel (higher than what president Biden wants) the U.S. is expected to keep pressuring more production. Other investors observe as Ukraine and Russia continue to stand off. This situation could lead to sanctions for Russia, which in turn could mean a pretty serious energy crisis if Russia shut off gas into Europe.

According to a statement from the committee, “Ongoing (oil production) outages in Libya, struggling production recovery in Nigeria, and reduced expectations for Russian production capacity add bullish weight to the scale from the supply side”.

Prices rose to an intraday high of $77.69 today, which is the highest they have been since November 26th.

USDJPY hits 5-year high, as WHO confirms Omicron “milder” than other variants

USDJPY climbed to its highest level in 5-years during today’s session, as the WHO gave an updated view on the Omicron variant.

After weeks of tests, the World Health Organization stated that, “We are seeing more and more studies pointing out that Omicron is infecting the upper part of the body. Unlike other ones, the lungs would be causing severe pneumonia”.

The statement came from WHO Incident Manager Abdi Mahamud, who added, “It can be good news, but we really require more studies to prove that”.

💡 A safe haven currency
USDJPY, which is seen as a safe haven currency, rose to an intraday high of 116.34, which was the highest rate for the pair since January 2017.

Gold prices were also up by $18 in Tuesday’s trading session. 

“It’s not what we do once in a while that shapes our lives. It’s what we do consistently.”

– Tony Robbins.

Eliman Dambell

Senior Market Analyst