Dow and S&P 500 Steady as Stocks Cap Blockbuster Year—and What Else Is Happening in the Stock Market on New Year’s Eve

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Happy New Year, Barron’s readers.

Bryan R. Smith/AFP/Getty Images

Stocks were steady in the last trading session of 2021, as major U.S. indexes remained on track to close out one of their best years on record.

The Dow Jones Industrial Average fell 20 points or less than 0.1% as New York trading began. The index ended 90 points down Thursday at 36,398, just shy of Wednesday’s record close of 36,488. The S&P 500 and Nasdaq both traded around flat.

Overseas, London’s FTSE 100 ended the year with a 0.3% daily decline, while in Hong Kong the Hang Seng Index closed 2021 with a daily finish 1.2% higher.

It has, by and large, been a tremendous year for stocks—and one for the history books. The S&P 500’s performance in 2021 lands in the top fifth of years dating back to 1927, with the Dow placing in the top third of years as far back as 1896.

The past year has taken investors on a ride that included ‘meme-stock’ frenzies, the best bull run for oil prices in more than a decade, and a stunning surge in the value of cryptocurrencies such as Bitcoin, among other trends.

“2021 has been a low volatility, high return year for the S&P 500. This is reminiscent of 2013 and 2017. Looking forward to 2022 (like 2014 and 2018) we expect volatility to pick up,” Thomas Hayes, the chair of Great Hill Capital, told Barron’s.

By the numbers, the Dow and S&P 500 climbed around 19% and 27% over the past 12 months, respectively. This outperformance has come in a year defined by, among other things, supply-chain challenges, labor shortages, surprisingly strong corporate earnings, a torrent of central bank stimulus—which has begun to slow—and creeping inflation.

“The defining characteristic of markets in 2021 for me was the incredible resilience of corporate earnings,” Tom Essaye, the founder of Sevens Report Research, told Barron’s. “Specifically, how a huge spike in inflation ended up being positive for corporate earnings as it didn’t reduce demand while corporate margins largely held firm or, in some instances, expanded.”

Corporate resilience is a view shared by many on Wall Street, including Heather Wald, vice president at Bel Air Investment Advisors, who highlighted that U.S. companies repurchased a record $1 trillion of their own stock in 2021.

“The anticipated return to normalcy in 2021 fell short of expectations, as highly transmissible Covid-19 variants continued to alter our everyday lives. U.S. equity markets, however, shrugged off major virus-related headwinds,” Wald told Barron’s. “With negative real interest rates on bonds and a lack of other compelling investment alternatives, investors instead poured excess cash into stocks.”

Not much was changed in markets as investors headed into New Year’s Eve—typically one of the quietest days of the year for markets. Trading has been subdued over the holidays, which has included some of the lowest-volume days of 2021, as seasonality took charge. Stocks often do well over Christmas in what is dubbed the Santa Claus rally; the S&P 500 has been on a steady rise since Dec. 20, gaining 4.5%.

Along with stocks, crude prices declined slightly Friday. Futures contracts for international oil benchmark Brent were down near 1% to below $79 a barrel, while U.S. futures for West Texas Intermediate crude were similarly down to just above $76. 

Despite Friday’s dip, oil prices climbed more than 50% in 2021 amid a global energy shortage and soaring demand for crude amid the economy recovery from the Covid-19 pandemic. Analysts see that continuing into 2022.

“Commodity prices will remain firm as product shortages aren’t going away,” Jeffrey Halley, an analyst at broker Oanda, told Barron’s. “Supply-chain challenges and global recovery demand will backstop prices. Brent crude should make its way towards $90-$100 a barrel in this environment.”

For cryptocurrencies, which have seen declines across the past week, the last day of the year was proving to be a celebration. Bitcoin, the leading digital asset, was up around 1% to around $48,000, while Ether—the second-biggest crypto— was up similarly to near $3,800.

“This week has been another volatile period for crypto,” said Marcus Sotiriou, an analyst at digital asset broker GlobalBlock. “Bitcoin is now bouncing back.”

Heading into 2022, Sotiriou expects more institutions to reallocate to crypto in the first quarter of next year, and said that data suggest this is already happening.

“Almost 10,000 Bitcoin left Coinbase ‘s exchange over the past 24 hours—this occurs when long-term investors (typically institutions) buy a large amount of Bitcoin, as they transfer the Bitcoin to a different storage location,” the analyst noted.

Bitcoin has climbed more than 60% since the beginning of 2021, but remains off highs above $67,000 seen in November. Ether has soared more than 400% this year.

Here are three stocks on the move Friday:

Chip group Advanced Micro Devices (ticker: AMD) rose 1.3%. The company announced late Thursday that it expected its acquisition of Xilinx (XLNX) to close in the first quarter of 2022 instead of by the end of this year. Xilinx stock dropped 0.8%.

Peloton Interactive (PTON) fell 0.8% following a downgrade from Market Outperform to Market Perform at investment bank JPMorgan.

Write to Jack Denton at jack.denton@dowjones.com