Stocks end 2021 on a weak note, still notch big yearly gain

Alex Veiga
Associated Press

Wall Street ended 2021 on a weak note Friday, but still managed to end the year with big gains.

The S&P 500 slipped 0.3%. It wound up with a yearly gain of 26.9%, nearly as big as its gain two years ago, just before the pandemic set in.

The S&P 500 notched its latest record high on Wednesday, its 70th of the year.

Company profits came in strong this year as the economy reopened, but the fast-spreading omicron variant and the looming end of the Federal Reserve’s easy-money policies are overhangs for investors going into the new year.

Most of the stocks in the benchmark S&P 500 index rose, with industrial companies, household goods makers and real estate firms among the sectors driving the market higher. Union Pacific rose 1%, Clorox added 1.1% and Duke Realty rose 1.4%.

Those sectors' gains were being kept in check by a slide in technology and communications stocks. Discovery fell 2.7% and PayPal slid 1.2%.

Vaccine makers were among the better performers, with Pfizer up 1.7% and Moderna up 0.8%. Additional governments had approved their vaccines for younger adults as well as boosters this week.

2021 has been a strong year for stock investors. The S&P 500, which hit its latest record high on Wednesday, is heading for a gain of roughly 27% for the year, or 29% including dividends. That’s nearly as much as the index gained in 2019.

It's also been an eventful year. A wave of consumer demand fueled by the reopening of economies pumped up corporate profits more than expected, which helped keep investors in a buying mood. There was also intense interest in so-called “meme stocks," in which large groups of individual investors bought up shares of beaten-down companies like GameStop and AMC Entertainment, causing institutional investors like hedge funds to lose billions.

The Federal Reserve and other central banks also helped prop up the market by keeping interest rates extremely low, which makes borrowing money more affordable for both companies as well as consumers.

There are still plenty of challenges going into 2022. They include rising inflation, global supply chain disruptions and outbreaks of more contagious variants of the COVID-19 virus..

Trading was very slow Friday. Most investors will not pick up trading until next week, or once fourth-quarter earnings reports start being released in early January.

The yield on the 10-year Treasury note held steady at 1.51%. The bond market closed at 2:00 p.m. Eastern, but stock trading will operate on a normal schedule.