US close: Airlines descend on Covid cancellations, Nasdaq underperforms

dl delta air lines airline us usa united states of america travel plane pd — Delta Air LinesSharecast / public domain image

US stocks closed in a mixed state on Wednesday, as investors digested data showing America’s trade deficit widened to a record high, while Omicron Covid variant cases continued to surge.

The Dow Jones Industrial Average ended the session up 0.25% at 36,488.63 and the S&P 500 added 0.14% to 4,793.06, while the Nasdaq Composite lost 0.1% to 15,766.22.

“Rising Covid cases in the US and Europe bring short-term concerns, but the Omicron variant also shows the potential to replace the deadlier Delta strain,” said IG senior market analyst Joshua Mahony.

“Growth stocks are losing momentum in the US, with expectations of higher interest rates putting pressure on stocks with lofty valuations.”

Mahony noted that the Nasdaq’s underperformance highlighted increased risks for growth stocks, as surging inflation laid a path towards higher interest rates globally.

“The desire to pay lofty prices for unprofitable stocks does tend to wane when central banks start to tighten the screw, with many likely to focus more on pro-cyclical and value stocks as a result.”

On the economic front, data from the Commerce Department showed the goods trade deficit widened last month by 17.5% to $97.8bn, up from $83.2bn in October and breaking the previous record in September of $97bn.

Imports were boosted by businesses seeking to stock up for the holiday shopping season.

Consumer demand for goods has been strong this year - as the US economy has kept growing, and stimulus cheques and record low interest rates have supported household spending.

Elsewhere, pending home sales - a leading indicator of the housing market's health - fell unexpectedly in November.

The National Association of Realtors’ (NAR) Pending Home Sales Index, which tracks the number of homes that are under contract to be sold, dropped 2.2% in November from October.

Analysts had forecast an 0.8% increase in sales, while on the year, pending sales slid 2.7%.

“There was less pending home sales action this time around, which I would ascribe to low housing supply, but also to buyers being hesitant about home prices,” NAR chief economist Lawrence Yun said.

In equities, electric car maker Tesla was down 0.21% after chief executive Elon Musk exercised all of his options expiring next year, signalling an end to his stock sales.

Shares in the company were still up around 54% for the year.

Domestic travel giants Delta Air Lines and Alaska Air Group descended 1.19% and 1.44%, respectively, after both cancelled hundreds of flights overnight as the daily count of infections surged, affecting staff availability.

Boeing shares also fell on the news, ending the day 1.2% weaker.

Dow Jones - Risers

Walgreens Boots Alliance, Inc. (WBA) $52.25 1.59%
Nike Inc. (NKE) $168.78 1.42%
Home Depot Inc. (HD) $410.84 1.14%
Procter & Gamble Co. (PG) $164.19 0.83%
Amgen Inc. (AMGN) $227.74 0.81%
Dow Chemical Co. (DOW) $57.06 0.76%
Johnson & Johnson (JNJ) $171.55 0.70%
Cisco Systems Inc. (CSCO) $63.96 0.68%
International Business Machines Corporation (CDI) (IBM) $133.36 0.54%
Unitedhealth Group Inc. (UNH) $505.57 0.52%