Stocks rose on Monday as investors began the new year by betting the economy could overcome the latest surge in Covid cases and lifted two of their favorite stocks to significant milestones.
Apple shares gained to become the first company ever with a $3 trillion market valuation, and Tesla shares jumped 13.5% in a single day.
The Dow Jones Industrial Average rose 246.76 points, or 0.6%, to hit a record close of 36,585.06. The S&P 500 also notched a record close, as it gained 0.6% to reach 4,796.56. The Nasdaq led the gains, advancing 1.2% to hit 15,832.80.
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Bond yields jumped to start the year with the 10-year Treasury yield topping 1.6%. That gave a lift to bank stocks, with Bank of America jumping 3.8%. Wells Fargo gained 5.7% after an upgrade from Barclays.
"It's a glass-half-full start to the year and that's been our perspective throughout 2021 and heading into 2022," said Tom Hainlin, global investment strategist at U.S. Bank Wealth Management. "We're still in that modestly optimistic outlook for the year ahead and think the economy and corporate profits are set up to support rising equity prices, at least in the first part of the year."
Apple shares gained 2.5% to hit a new record and reach a $3 trillion market cap, becoming the first U.S. company to do so and tripling its valuation in less than four years.
Tesla helped generate some of the momentum Monday, jumping after the electric vehicle company reported 308,600 deliveries in the fourth quarter, beating expectations. Along with Tesla, big automakers also saw their shares climb. Ford Motor and General Motors rose about 4.8% and 4.3%, respectively.
Reopening stocks broadly pushed higher on Monday. Airlines rose as investors shrugged off concerns about holiday flight cancelations that have extended into Monday. American added 4.4%, and United gained nearly 3.9%. Norwegian Cruise Line and Carnival Corp were among the top gainers in the S&P 500, adding about 6.9% and 6.4%, respectively. Casino stocks were higher too, with Las Vegas Sands and Wynn Resorts were each up more than 3%.
Stocks have a tendency to gain in the start of a new year as investors look to put new money to work, Bank of America noted on Monday. The S&P 500 was up in the first week of the calendar year in 11 of the last 13 years, with an average gain of about 1.6%, the firm found.
Monday's moves come after markets closed out a strong 2021 last week. The S&P 500 rose nearly 27% for the year, with the Nasdaq Composite and Dow also posting large returns. Stocks fell slightly on Friday, but the S&P 500 and Dow were positive for the final week of the year.
Still, uncertainty around the Covid-19 pandemic remains for the start of the year. The rise of the omicron variant helped lead to thousands of flight cancellations during the holiday season and has led some businesses and schools to consider temporary closures. Also, several major Wall Street banks have asked employees to work from home for the first few weeks of January.
While the fast spread of the omicron variant has been reflected in case numbers, data shows it hasn't led to a major increase in hospitalizations, and investor appetite for vaccine makers has been subdued. They were among the biggest decliners Monday, with Moderna and BioNTech down about 7.4% and 10%, respectively. Pfizer fell 4%.
"Every single wave that we have of a new variant, we get over faster, and I think that will continue to happen," Liz Young, SoFi's head of investment strategy, told CNBC's "Halftime Report" Monday.
Infectious disease expert Dr. Anthony Fauci told ABC's "This Week" on Sunday that U.S. health officials may soon update guidelines to include a testing recommendation to signal when a person who previously tested positive for Covid can leave isolation.
However, "what we saw with this last wave is it impacted supply and not demand, which tells me that inflation is still here to stay for the first half of 2022," Young added.
Inflation and monetary policy are key themes for 2022, as investors expect the Federal Reserve to hike rates multiple times in the coming year to help cool the rise in prices for consumers. Those higher rates wouldn't necessarily be a bad thing as they would indicate strength in the economy, but it's something stocks have to "trudge through in order to get to the other side in positive territory," Young said.
— CNBC's Michael Bloom contributed to this report.
Correction: This story has been updated to reflect that the Dow and the S&P 500 finished at record closing levels, not intraday levels.