Direction lost. Stocks slipped yesterday after poor economic numbers and more dissent in Washington. Airbnb’s IPO day pop was a good distraction on a day with very little positive news.
N O T E W O R T H Y
Waiting for that train that may never arrive. As we wind down a week with very little in the way of positive news, it is no wonder that stocks are on tap to log losses after gaining 4 out of the past 5 weeks. Prior gains were spurred by having the elections behind us, positive news from vaccine providers, and renewed hope of a fresh round of stimulus from Washington. Ignored in those weeks was the almost geometric rise in virus cases and increasingly weak economic figures. After all, vaccines are now being shipped and distributed. The UK was the first to approve and begin to administer Pfizer’s vaccine earlier this week. Canada’s approval soon followed and the US FDA passed its final hurdle for approval last night WHILE YOU SLEPT. The economy is recovering but on shaky, shaky legs. That’s right, I used the word “shaky” twice to underscore just how delicate things are. A big part of the recovery came with the ending of draconian restrictions, made possible by warmer weather, which heralded outdoor dining and activities. Virus case growth slowed as more and more people socialized, ate, and shopped in outdoor spaces. Spending more meant many sidelined service employees could return to their jobs and unemployment began to recede. As Summer ended and Fall began, COVID case growth began to increase as many became lax in their distancing habits. Resulting restrictions curtailed the economic recovery and temperature changes made outdoor activities more challenging. I am sure that I don’t have to tell you that less spending resulted, which led to further losses in business revenues and increased layoffs. The healthcare and economic experts were quite vocal in their warnings of this very occurrence. The solution for the temporarily faltering economy lies in the hands of lawmakers who have been negotiating for months, well aware that a stimulus package would be critical to bridge the fragile economy over the final tough miles until a vaccine could be widely distributed. Late last week, it appeared that Congress was finally making progress and markets began to factor in a December agreement. Unfortunately, no further progress was made this week causing investors to question last week’s optimism. Lawmakers appear to be in agreement over the size of the package but are still stuck on legal protections and state aid. Yesterday, the Department of Labor released its weekly employment numbers which showed a surprising +853 k new unemployment claims. The jump represented a multi week high and included an increase in Continuing Jobless Claims, registering its first weekly gain since August. The jump is a direct result of the increased restrictions which have been enacted in response to the latest virus surge. More people are newly unemployed, many already unemployed people will lose extended benefits within weeks, and virus cases continue to spike. Businesses continue to struggle and state budgets are being decimated, causing additional layoffs. You know where this is going… and so do lawmakers. Hopefully they will act soon and give the markets something to cheer about once again.
THE MARKETS
Stocks teetered back and forth yesterday, ultimately closing mixed as Congress continued to negotiate with no agreement in sight. Jobless numbers missed expectations adding to the discomfort. The S&P500 slipped by -0.13%, the Dow Jones Industrial Average gave up -0.23%, the Russell 2000 Index climbed by +1.08%, and the Nasdaq Composite Index added +0.54%. Bonds rose and 10-year treasury yields fell by -3 basis points to 0.90%. Crude oil jumped by +2.77% and the energy sector cheered, gaining +2.93%.
NXT UP
- Core PPI (Nov) may have increased by +0.2% for the month, after growing by the same amount in October.
- University of Michigan Sentiment (Dec) is expected to come in at 76, down slightly from last month’s 76.9.
- The Fed’s Esther George and Randall Quarles will both speak today.
- Next week, we will get Industrial Production, Retail Sales, flash PMIs, housing numbers, and the Leading Index. The FOMC will meet next week, which will garner lots of attention. Check back on Monday for details and calendars.