Week 52 in Brief
How did the major indices perform?
U.S. stocks finished higher on Thursday, the final trading day of the Christmas week. Activity remained subdued due to the holiday. Markets across the world remained closed on Friday in observance of Christmas.
- On Friday, the Dow Jones Industrial Average rose 70.04 points, or 0.2%, to 30,199.87, leaving it up 0.1% for the week; the S&P 500 edged up 13.05 points to 3,703.06, an increase of less than 0.1%, but finished down 0.2% for the week; and the Nasdaq Composite rose 33.62 points, or 0.3%, to 12,804.73, contributing to an 0.4% weekly rise.
- On Wednesday, the small-cap Russell 2000 index booked its 13th record close of 2020 while most other equity gauges logged modest gains.
What drove the markets?
- Markets remain focused on the stimulus package and government funding legislation that Congress passed on Monday, despite President Trump’s unhappiness with the bill.
- On Wednesday, Trump asked lawmakers to increase direct payments to qualified individuals to $2,000 from $600 and also vetoed a $740.5 billion defence-policy bill.
- Thursday trade officially began the Santa Claus rally, a period that has historically been good for U.S equities, producing an average 1.3% gain over the stretch, according to research from Ryan Detrick at LPL Financial.
- The market continues to be haunted by worries about the spread of the coronavirus, despite a roll-out of vaccines.
- Meanwhile, U.K and EU officials announced a Brexit trade deal on Thursday after months of protracted negotiations, and ending years of uncertainty around how a post-Brexit relationship between the two sides might take shape. The agreement now has to be ratified by the U.K. and European parliaments. Investors say that the deal won’t be a significant catalyst for U.S. markets but does remove one headwind for investors amid a plethora of virus and non-virus-related worries.
Economic Data & Policy
- The number of Americans filing first-time claims for unemployment benefits unexpectedly fell last week, though levels remain elevated as more businesses face restrictions and consumers hunker down amid a surge of new COVID-19 cases.
- Initial claims for state unemployment benefits totalled a seasonally adjusted 803,000 for the week ending December 19, compared with 892,000 in the previous week, the US Labor Department said on Wednesday. Economists polled by Reuters had forecast 885,000 applications in the latest week.
- Though jobless claims have dropped from a record 6.867 million in March, they remain above their 665,000 peaks during the 2007-2009 Great Recession.
Stocks in focus
- Tesla had the biggest drag on the S&P 500 Index in its first day of trading on the benchmark on Monday. The electric-vehicle maker, which now represents 1.6% of the index and ended the day as its sixth heaviest-weighted stock, fell as much as 7% as it retraced gains from Friday when tens of millions of shares were purchased by index-fund managers. Tesla has soared 731% this year in anticipation of the historic inclusion, making it the biggest company ever to be added to the benchmark. The EV pioneer also joined the S&P 100, replacing oil and gas firm Occidental Petroleum Corp. Tesla closed the week at $ 661.77 from a high of $695 last week.
- Shares of Alibaba Group tumbled after reports that Chinese regulators launched an anti-monopoly investigation on the e-commerce giant. Us shares finished down 13.4%, at $ 222.00 from $256.23 Wednesday. China-linked ETFs also fell following the news.
- Shares of Cloudera Inc. were also in focus after the company announced buying back all of Intel Corps. stake in the firm for $314 million. Cloudera’s stock was down 0.9% at $14.88 while Intel was up 1%, closing at $47.07.
- Software provider SolarWinds Corp released updates in response to the “SUPERNOVA” malware that was used to hack into U.S. government computer systems but shares remained down 1.5%, closing at $15.75.
How did the European markets perform?
- Brexit-sensitive banks led the pan-European STOXX 600 index 0.2% higher to make up losses from earlier in the week when a new fast-spreading variant of the coronavirus spooked markets. The DAX gained 1.26% and the FTSE 100 rose 0.10%. The CAC 40 lost 0.10%.
- Unprecedented amounts of stimulus, and lately vaccine optimism, have seen the STOXX 600 rise close to 50% from its March lows, though it remains about 9% below this year’s pre-pandemic high and is on course to end the year about 5% lower.
- U.K. ETFs jumped on Thursday as negotiators finalized a Brexit deal. The Invesco CurrencyShares British Pound Sterling Trust and the Franklin FTSE United Kingdom ETF were both up slightly more than 0.6% mid-morning, and the iShares MSCI United Kingdom ETF gained 0.5%. The pound also jumped 0.5% on the news. Britain is set to leave the EU’s economic bloc on Jan. 1, but few details about the post-divorce trade configurations had been set until now.
- Banks and oil stocks have weighed the most on worries about the economic toll of the pandemic, while technology stocks have led the recovery among major sectors as they emerged winners amid the work-from-home trend.
How did Asian markets perform?
- Asian markets finished mixed as of the most recent closing prices. The Shanghai Composite gained 0.99% and the Hang Seng rose 0.16%. The Nikkei 225 lost 0.04%.
Commodities and other assets
- Oil futures were virtually flat, with the U.S. benchmark up less than 0.1% at $48.16 a barrel on the New York Mercantile Exchange, with the contract on track to halt its streak of seven consecutive weekly increases.
- Gold futures for February delivery were up 0.2% at $1,882.70/oz.
- The 10-year Treasury note yield shed 3 basis points to around 0.93%. Yields and prices move in opposite directions.
- The ICE USD Index fell 0.1%, standing at 90.285, off its 2 1/2-year low of 89.723 touched last week.
- GBP hovered below a 2-1/2-year high on Friday after Britain and the EU struck a narrow Brexit trade deal, while overall sentiment in currency markets was tempered by a stalled U.S. coronavirus economic relief package. The sterling last stood at $1.3549, having failed to rise above its 2-1/2-year high of $1.3625 hit last week.
- USD traded at 103.55 JPY, down 0.2% on the day while the euro traded almost flat at $1.2188.
- The offshore Chinese yuan was flat at 6.5185 per dollar.
- Meanwhile, emerging market currencies rebounded on Wednesday from declines earlier this week, with Russia’s ruble snapping a three-day losing run and the Turkish lira firming in hopes of a central bank rate hike this week.
- RUB gained 0.8%, shrugging off a decline in oil prices as the U.S. dollar weakened against its major peers.
- Stocks are expected to close out 2020 in the week ahead with double-digit gains, but as the market moves into 2021, the rate of advance could slow.
- Watch out for our Monday Weekly Market Outlook that provides insights on what’s coming up that week.