Market in a Minute Jan 11-15 2021
by Sheila and Rich Jamison
The Dow and NASDAQ each hit new highs but stocks ended lower despite President-elect Biden proposing a larger-than-expected $1.9 trillion COVID-19 relief package. The plan is designed to garner bipartisan support, but coming on the heels of a recently enacted $900 billion program, Senate passage is far from assured. Economic activity is expected to remain sluggish in the coming few months while the vaccine rollout picks up pace and government stimulus payments make their way into consumers' hands.
The 10-year US Treasury yield ended little changed despite reaching 1.18% early in the week. West Texas Intermediate crude oil rose again. Volatility (VIX) rose to 24.1 from 21.7.
Offense vs. Defense
It seems to come down to the speed of COVID’s spread (the offense) versus the speed of vaccination (the defense). Each held sway over the market at different times last week. The far behind schedule vaccinations are speeding up. New infections show signs of leveling off, but the lagging hospitalizations and deaths are still increasing.
President-elect Biden’s proposed $1.9 trillion coronavirus relief measures include $1,400-per-person checks for individuals below a certain income, enhanced unemployment benefits through September and hundreds of billions of dollars in aid to state and local governments. Biden favors setting aside deficit concerns, saying there is a dire need to act now. A package is likely to be enacted but it could be smaller than the proposal.
In case you somehow missed it, President Trump was impeached (for incitement of insurrection in the US Capitol debacle). However, with his term set to expire Wednesday, it is unclear when (or if) the Senate will hold a trial. If convicted, Trump would be barred from holding office ever again.
A single-shot vaccine is on the horizon. Trial data show Johnson and Johnson's coronavirus vaccine candidate is safe and appears to generate a promising immune response. The vaccine does not require the elaborate logistical considerations of the mRNA vaccines, making distribution easier and it can be stored for months under normal refrigeration. Phase-3 results are pending, and if in line with the early data, emergency-use authorization could come early next month.
Fed Reserve Chair Powell tamped down speculation that the Fed would taper its asset purchases any time soon, and reiterated holding interest rates low.
December retail sales disappointed as Americans pinched pennies over the holiday season. Rising COVID-19 cases and restrictions resulted in a 0.7% decline, the third straight month of dropping sales.
With Q4 earnings just beginning (5% of S&P 500 companies in), blended earnings per share is running at -7.4% and sales up 0.4% year-over-year. Several large US banks (Citigroup, JPMorgan Chase, Wells Fargo) reported strong earnings as they released loan loss reserves held back during the depths of the pandemic’s downturn.
The IMF urged countries to continue strong fiscal and monetary efforts to support their economies after the global resurgence of the coronavirus.
The UK’s November economy fell 8.9% year-over-year, less than expected. Lockdowns had a somewhat-less-negative economic impact as companies adapted better than they did in the initial phase of the pandemic.
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