Week 1 in Brief
How did the major indices perform?
- U.S. stocks closed high on Friday, closing a volatile first trading week of the new year as President-elect Biden promised more financial aid for Americans to offset the worst job report since April amid a resurgence of COVID-19 cases.
- On Friday, the Dow Jones Industrial Average closed up 56.84 points, or 0.2%, at 31,097.97 for a new record, after four straight weeks of gains; the S&P 500 added 20.89 points to end at 3,824.68, a gain of 0.6%, another new record and the second consecutive week of gains; while the Nasdaq Composite rose 134.50 points, or 1%, to 13,201.98, to also close at a record after four straight weeks of gains.
- On Thursday, the market booked a quartet of record closing highs after Congress confirmed President-elect Joe Biden’s election win; all indices closed at record highs.
- For the week, the Dow gained 1.6%, the S&P 500 rose 1.8%, and the Nasdaq Composite added 2.4%. The Russell 2000 index snapped a winning streak, closing down 0.3% for the day, but up 5.9% for the week.
What drove the markets?
- The market was focused on the jobs report which showed the U.S. economy lost 140,000 jobs in December, well below forecasts for a gain of 55,000; the impact of the covid-19 related measures on private sector activity; dramatic political activities in Washington DC and Georgia; and talks on stimulus talks.
- Jobs Report: Stocks regained their footing Friday, after initially pulling back in the wake of a jobs report showing that the U.S. economy lost 140,000 jobs in December, well below forecasts for a gain of 55,000. While the U.S unemployment rate remained unchanged at 6.7%, data from the Labor Department report suggests that many Americans left the workforce in the largest decline since last April, when the U.S. lost 20.8 million jobs in that one month alone.
- Covid-19 Impacts: The government report comes after a report on Wednesday from ADP showed the private sector shed 123,000 jobs in December, as consumer and business activity in some states was affected by lockdowns to limit the spread of COVID-19. The government report showed that 95,000 private-sector jobs were lost in December. The U.S registered record deaths on Thursday with at least 4,111 lives lost from COVID, representing the most in a single day since the start of the outbreak.
- Meanwhile, measures to control the spread of COVID-19 had a big impact this month, specifically in the leisure and hospitality sector where payrolls fell 498,000. Analysts estimated that if it weren’t for renewed lockdowns payrolls would have shown a gain of 358,000. Optimism about coronavirus vaccine distribution was boosted when Pfizer Inc. and German partner BioNTech SE said Friday an in vitro study found that their COVID-19 vaccine neutralizes the two new highly infectious variants that have emerged in the U.K. and South Africa.
- Dramatic political events in Washington and Georgia also drove equities this week. Wins by Democrats against incumbent Republicans in the U.S. Senate shifted the balance of power in Congress while rioters encouraged by President Donald Trump stormed the Capitol building to try to block Congress from certifying President-elect Joe Biden’s November win. In particular, markets focused on the political wins by Democrats Jon Ossoff and Raphael Warnock in the Senate runoff elections on Tuesday, which raised the prospect of additional coronavirus fiscal relief measures and other legislation that could boost the U.S. economy after Biden becomes president in 12 days. The President-elect already called for extra financial relief for Americans “now” after the latest U.S. jobs report showed losses for the first time in eight months, a reflection of the continued toll the coronavirus pandemic is taking on the economy.
Stocks in focus
- The consumer discretionary and real estate sectors each rose more than 1%, lifting the S&P 500. Coca-Cola rose 2.2% to lead the Dow higher while the Nasdaq got a boost from Tesla, which popped 7.8%. Coca-Cola closed at $51.08 while Tesla closed at $880.02. Also, Facebook, Alphabet, and Slack were among companies that defied the week.
- On Friday, Bionano Genomics Inc. said it has priced an underwritten public offering of 29 million shares at $3.05 a share; Shares lost 6%.
- Apple shares were in focus as reports pointed to potential joint ventures for the iPhone maker’s electric-vehicle ambitions. The stock rose 0.9%, closing the week at $132.05.
- Meanwhile, Bed Bath & Beyond Inc. said in a filing that it has entered into a share repurchase agreement with JPMorgan in which the home goods retailer will acquire $150 million shares. Shares closed 1.1% higher.
How did the European markets perform?
- European stocks logged their strongest weekly gains since November on Friday, with Germany’s DAX hitting a record high on the back of better-than-expected economic data and encouraging earnings updates from chipmakers, Reuters reported.
- The pan-European STOXX 600 index rose 0.7% to bring gains for the first week of 2021 to 3%, largely driven by hopes that a Democrat sweep of the U.S. Senate would lead to a large U.S. fiscal stimulus package. However, the STOXX 600 trades nearly 5% below its record high hit in February 2020.
- Germany’s DAX index outperformed, gaining 0.6% after data showed both industrial output and exports rose more than expected in November. “Germany is the powerhouse in Europe. If you get data out with value, especially at these uncertain times, that is going to push prices up and that seems to be what is happening now,” ETX Capital analyst Michael Baker said.
- The UK’s FTSE 100, heavy on bank and commodity stocks, added just 0.2% to stand 6% higher on the week.
- A European Commission monthly survey showed economic sentiment in the eurozone ticked up in December, but inflation held in negative territory, lending weight to expectations of loose monetary policy in the bloc.
How did Asian markets perform?
- Asian markets finished mixed as of the most recent closing prices. The Nikkei 225 gained 2.36% and the Hang Seng rose 1.20%. The Shanghai Composite lost 0.17%.
Commodities and other assets
- The 10-year Treasury note was up nearly 5 basis points at 1.13%, as traders bet on stronger inflation pressures. Bond yields rise as prices fall.
- Oil futures traded higher Friday with Crude for February delivery up 3.3% to $52.50 per barrel.
- Meanwhile, Gold futures tumbled 3.5% to trade at $1,847.2 an ounce.
- The ICE U.S. Dollar Index, a measure of the U.S. currency against a basket of six major rivals, was up 0.3% as the dollar turned higher following rising expectations of stimulus measures to prop up the US economy.
- The dollar index last rose 0.35% at 90.117 after touching a high of 90.252, its best level since Jan 1. The index dropped 7% in 2020 and as much as 0.9% in the first few days of the new year on expectations of U.S. fiscal stimulus. But since hitting its lowest level since March 2018, the greenback has found some footing, climbing as much as 1.2% over two sessions.
- Both EUR and GBP weakened against USD as it gained ground. The euro was last down 0.5% to $1.2209 while sterling was last trading at $1.3562, down 0.01% on the day.
- Meanwhile, Bitcoin hit a fresh all-time high of $41,802.84 and last rose 2.39% to $40,454.81, after smashing through $40,000 for the first time on Thursday.
- The stock market has been focused a lot on politics recently, but starting next week, earnings will once again be front and center. JPMorgan Chase, Citigroup, and other U.S. banks are set to kick off fourth-quarter earnings season this coming week, and a majority of S&P 500 companies will follow them over the next month.
- Watch out for our Monday Weekly Market Outlook that provides insights on what’s coming up that week.