Is Santa in the house?

With momentum building before the holidays and the S&P 500 recording its 68th record close of 2021, traders are keeping their eyes on the chimney to see if the so-called Santa Claus rally will take shape this year. The seasonally bullish trend typically sees equities rise over the last five trading sessions of December and the first two trading days of January. Since 1928, the S&P 500 has been positive in that stretch 78.5% of the time, according to data from Bank of America. Futures movement: Dow +0.1%; S&P 500 +0.2%; Nasdaq +0.3%.

Bigger picture: This year, there are a lot of factors to contend with that are mostly dependent on the direction of Omicron (inflation fears, Fed tapering and coming rate hikes have done little to dampen the stock market rally). So far, investors appear to be relying on Omicron being milder than other variants, as well as any serious effects being mitigated by a rollout of booster shots. People with Omicron are also up to 70% less likely to require admission to a hospital than those with the Delta variant, according to a recent U.K. government study.

Some are still nervous about the rapidly spreading strain's disruption on business activity, which has exacerbated a labor shortage just in time for the holidays. That could mean even if consumers remain willing to go out, businesses will have to close when too many employees are sick or get stuck in quarantine. That doesn't appear to have deterred U.S. retail spending, with Mastercard SpendingPulse reporting an 8.5% Y/Y rise for the period spanning Nov. 1 to Dec 24, marking the biggest annual gain in 17 years.

Analyst commentary: "Everything seems to be serious but manageable. Anything that changes that, this could probably make a big impact," said Luca Paolini, chief strategist at Pictet Asset Management. It's also worth noting that market moves could be amplified during the holiday season due to a lack of liquidity. With many people taking off the final week of the year, the prices at which traders are willing to buy and sell may be higher or lower since there are fewer counterparties.

'Spider-Man' surpasses $1B

Many films at the box office have bombed since the pandemic (see West Side Story and The Matrix Resurrections as recent examples), but one movie has overturned that sentiment despite a fifth wave of COVID-19. Spider-Man: No Way Home reached $1.05B at the global box office over Christmas weekend, making it the first film to reach the benchmark since 2019. No Way Home was also the third-fastest film ever to cross $1B (in just 12 days) and did so without the benefit of its release in China.

Backdrop: No Way Home was another co-production between Sony (NYSE:SONY) and Disney (NYSE:DIS) after the two brokered a deal in 2015 for Spider-Man to appear in Marvel's cinematic universe. The partnership also saw Marvel getting involved in Spider-Man's solo projects, which were financed by Sony, and the agreement was renegotiated in 2019 to split production costs and box office receipts. Tom Holland, who plays the newest iteration of Peter Parker, has appeared in six Marvel Cinematic Universe films, including three solo features.

"The partnership between these two Hollywood entities is clearly one of great benefit to both," said BoxOffice.com chief analyst Shawn Robbins.

Putting it in perspective: With just several days left in 2021, the North American box office has brought in $4.3B (with over 10% of that, or $467M, from Spider-Man: No Way Home). Before the pandemic, a typical year at the box office exceeded $11B.

Travel woes

Tens of thousands of holiday travelers had their plans upended over Christmas weekend as flight cancellations disrupted one of the busiest travel seasons of the year. A total of 957 Christmas Day flights, including domestic flights and those into or out of the country, were canceled, up from 690 on Christmas Eve. Another 1,318 flights were called off on Sunday, according to FlightAware.com, while cruise ships from Royal Caribbean (NYSE:RCL) and Carnival (NYSE:CCL) had to ditch stops due to outbreaks on board.

Quote: "The nationwide spike in Omicron cases this week has had a direct impact on our flight crews and the people who run our operation," said Maddie King, spokesperson at United Airlines (NASDAQ:UAL). "We are working hard to rebook as many people as possible and get them on their way for the holidays."

Other carriers like Delta (NYSE:DAL) and JetBlue (NASDAQ:JBLU) also blamed staffing shortages, with "COVID-related sick calls" resulting in quarantines of pilots and crew. Delta even previously asked the CDC to halve 10-day quarantine recommendations for vaccinated staff, saying it "may significantly impact our workforce and operations." Not all airlines were affected equally by the disruptions, with Southwest (NYSE:LUV) reporting no issues to its flight schedule on Saturday, though weather-related issues impacted the airline on Sunday.

Go deeper: "Lower travel, equaling lower economic activity in the U.S., equals lower WTI, the U.S. oil benchmark," noted OANDA analyst Jeffrey Halley. Crude futures (CL1:COM) are down 1.3% to $72.85 a barrel on the news, with surging COVID-19 cases across the country. The average number of new U.S. coronavirus infections has risen 45% to 179,000 per day over the past week, with Omicron accounting for nearly three-quarters of the cases.

Scrapping limits

Over the years, China has gradually peeled back limits on foreign ownership in the domestic auto industry, but it's now hitting the accelerator. Beginning Jan. 1, 2022, the country is pulling out all the stops to investment in the sector, allowing full foreign ownership of local passenger car manufacturing. That's according to a release from the Ministry of Commerce and the National Development and Reform Commission, the nation's top economic planning agency.

Snapshot: Since 2009, China has been the biggest in the world in terms of automotive manufacturing. In fact, annual automobile unit production in China accounted for over 30% of worldwide vehicle production, which exceeds that of the EU or that of the U.S. and Japan combined, according to database company Statista.

China's "Big Four" domestic car manufacturers include SAIC Motor, Dongfeng (OTCPK:DNFGY), FAW and Chang'an. Other automakers include Geely (OTCPK:GELYY), BYD (OTCPK:BYDDY), Brilliance Automotive (OTCPK:BCAUY), Guangzhou (OTCPK:GNZUF) and Great Wall (OTCPK:GWLLY). There are also EV players like Nio (NYSE:NIO), XPeng (NYSE:XPEV) and Li Auto (NASDAQ:LI), while several multinationals have partnerships with domestic manufacturers.

Note: China still has 31 areas in which foreign investment is banned or restricted, including rare earths, nuclear power, telecom and news companies, and education institutions. In industries like medical organizations, foreign entities must form joint ventures with local partners, which usually have the majority stake.

Today's Markets

In Asia, Japan -0.4%. Hong Kong closed. China -0.1%. India +0.5%.
In Europe, at midday, London closed. Paris +0.2%. Frankfurt +0.2%.
Futures at 6:20, Dow +0.1%. S&P +0.2%. Nasdaq +0.3%. Crude -1.3% at $72.85. Gold -0.3% at $1806.60. Bitcoin +1.6% at $50880.
Ten-year Treasury Yield -1 bps to 1.48%

Today's Economic Calendar

10:30 Dallas Fed Manufacturing Survey
1:00 PM Results of $56B, 2-Year Note Auction

Companies reporting earnings today »

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China proposes stricter rules for overseas listings, though no outright ban.

Colin Kaepernick SPAC deal (NYSE:MACC) with minority lender is said to collapse.

Cryptos brace for further adoption, price volatility next year - S&P Global.

FDA grants Roche (OTCQX:RHHBY) at-home COVID test Emergency Use Authorization.