The S&P 500 index surged to an all-time high on Monday as investors cheered the strength of the American consumer. The index also surged even as the number of Omicron cases in the US kept rising. It is trading at $4,790, bringing the year-to-date gains to more than 29%.

Holiday sales

The biggest catalyst for the S&P 500 on Monday was a report by Mastercard, the giant payment processing company.

Every year, the company uses its technology to track the performance of the holiday season, which happens between November 1 and December 25.

In its report published on Monday, the company said that American retail sales excluding autos jumped by 8.5% in this year’s holiday season. This was a significant jump from the same period in 2019 and 2020.

E-commerce was a key driver for the surge in sales. Its sales rose by about 11% in the holiday season and accounted for about 22% of total sales. Before Covid, e-commerce accounted for less than 15% of total sales.

There are three possible reasons why US holiday sales did well this year. First, because of the supply chain disruptions, more people did their holiday shopping a bit earlier. Second, the Omicron variant has been spreading recently. As such, more people bought products as they predicted more government shutdowns to curb the disease.

Third, and most importantly, the American consumer is in a good place. The unemployment rate has declined to about 4.3%, while wages have improved. At the same time, the performance of cryptocurrencies and stocks has led to a significant jump in wealth, which has been translated to shopping. 

Retail stocks led

Retail stocks were among the best performers in the S&P 500 index on Monday. For example, the Costco stock price jumped by more than 2.38% as investors predicted that it did well during the holiday season. The stock has jumped by more than 50% this year. 

Walmart, the giant retailer, saw its stock price jump by more than 0.90%, while Target shares rose by more than 1.40%. In all, the VanEck Retail ETF (RTH) that tracks the biggest American retailers jumped by more than 1% on Monday.

In addition to the retail sector, there was another catalyst that pushed the S&P 500 higher. In the past few months, the number of Omicron cases in the US has been in a sharp increase. For example, the country published more than 200k cases on Monday.

While these numbers are not good, recent reports suggest that the Omicron variant is not all that dangerous. Its symptoms are mild and many patients don’t require hospitalization. In South Africa, the number of cases have started to decline as well. 

Therefore, the S&P 500 rose because investors expect that the supply chain disruptions caused by the disease will be relatively lower than expected.

Another reason is that the S&P 500 tends to rise during the Christmas season, in what is known as the Santa Claus rally.

S&P 500 forecast

The four-hour chart shows that the S&P 500 index has been in a strong bullish trend in the past few days. It has managed to rise by about 6.65% from its lowest level this month. 

At the same time, the index has moved above the 25-day and 50-day exponential moving averages (EMA) while the Relative Strength Index (RSI) has been rising. Therefore, the bullish trend will likely continue this week as bulls target the key resistance at $4,900.

The S&P 500 index 4-hour chart