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Stocks rebound after Omicron concerns rattle markets

Yahoo Finance's Jared Blikre explains the likelihood of a Santa Claus rally as stocks rebound following an Omicron-related sell-off and oil recovers.

Video transcript

AKIKO FUJITA: Let's turn our attention back to the markets. Certainly, a lot of upside in the afternoon session. As we see, stocks bounce back after three straight days of losses. Some of the airline names, the travel names, seeing a big pop in this session, despite those Omicron headlines that Jess just pointed to. Let's bring in Yahoo Finance's Jared Blikre, who's tracking all the market action for us today. Jared.

JARED BLIKRE: That's right, Akiko. And, as you said, bucking the trend that we saw over the last three days. And I want to go straight to the YFI interactive where we can chart this. And this is a five-day view of intraday price action. And we had that high last-- looks like the close last Wednesday. And it's been down ever since.

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And it's really apparent on a longer term. This is a two month candlestick chart of the S&P 500. You can see these three big down candles-- those red candles right there. And we are bouncing off of that. Not in the clear just yet, but it is the end of the year. People talk about the end of the year rally, the Santa Claus rally, which I'll get to in a second.

And it looks in the bond market that the bond market is also confirming. I think that's important as well. The five-year T-note yield, that's up six basis points. The 10-year is up seven basis points. And the 30-year is also up seven basis points. So the yield curve is expanding, and it's going in the right direction. It's what they call a bear steepening.

Now the US dollar is a little bit firmer, but not really that far off of yesterday's lows. We're not going to call it anything to be concerned with just yet. And I think the sector action is really telling in what we're seeing in the market today because the value and cyclical trade definitely on. Energy up nearly 2 and 1/2 percent in the upper left, followed by financials, industrials, consumer discretionary. All of these up more than 1 and 1/2 percent.

To the downside, the big underperformers are all those defensive sectors. So staples, health care, utilities, and real estate. So pretty bullish setup here. And now back to the Santa Claus rally as I show us the travel sector.

The Santa Claus rally begins with the Thursday's close, and it extends into the first two days. I was saying three days before. It's actually the first two days of January. So it's seven days total. And we'll have to see what comes of that. But, in the meantime, we still have 2 and 1/2 days of price action.

Now there is a very bullish tilt. As we can see here, Carnival Cruise lines up 9%. Some of the airlines faring well, too. American up 5%. This is on hopes for what President Biden will be delivering in his speech. And if you want to see the risk on nature of the market, you can really see it in some of the beaten down sectors.

So this would be China. We know what-- we know the story on China. And we're seeing a big risk reversal here today. Also, the Ark Innovation Fund. I think this is pretty telling as well. If you see those red spots-- Zoom, Roku, some of the others-- those are really the work from home trade that's being rejected today. So I'm taking this as a pretty bullish sign as well.

If you look at the semiconductors, they're participating. Software, which has been beaten down over the last four to six weeks, that's participating as well. Now health care, more of a defensive sector, we're seeing a bit more red there. So I'm actually interpreting that as a little bit bullish. So I don't want to get ahead of myself, but over the next few days as liquidity evaporates, probably, hopefully not going to see too many more hiccups in the market. And then we can finally jump aboard Santa Claus' Sleigh.

AKIKO FUJITA: Yeah, as our guest Liz Young said earlier, this is a reminder that the market is a leading indicator. And you look at some of those names that are seeing some downside today.