By A Thread

By a thread.  Stocks struggled to hold on to early gains as the Senate continued to flounder on fiscal relief.  Healthcare workers are getting vaccinated and the US national death toll passed another ugly milestone, leaving investors on edge.

N O T E W O R T H Y

Paying the Bill.  It was all about the bill yesterday, wasn’t it.  Stocks started the day with a kind-of airy feel, opening in the green on the heels of last week’s losses, which snapped a 2-week winning streak.  Senators were back in the nation’s Capitol after a refreshing 3-day weekend with their families.  Ostensibly, the break would help them see clearly through the last few hurdles and get a deal done.  I know that I hammer on this point rather frequently, but there is very little logic in holding up progress on a next round of stimulus.  THE HANDWRITING IS ON THE WALL. It is in the numbers.  The recovery is faltering under its own weight and the growing number of restrictions being imposed in response to a recent virus surge. Well, let's just say, the market started off yesterday’s session hoping for some progress.  Then came the first bill in the form of Mayor Bill de Blasio of New York City.  Already known was that NYC would be closing down indoor dining starting yesterday. With the cold weather AND SNOW rapidly approaching, indoor dining restrictions will surely have a negative impact on the very frail local economy.  It is not all about New York, no, but it does mirror a theme playing out across the country.  Summing up all of those drags on local economies will certainly have a collective negative impact on the national economy.  Back to Mayor Bill, who in his daily briefing, said that New York City should be prepared for another shutdown as COVID hospitalizations continue to rise.  That message sent the stock market into a downward direction for the remainder of the session.  Never one to be upstaged by the Mayor, New York State Governor Cuomo made similar statements in his afternoon briefing which intensified the selling into the close.  Now, onto that other bill, the one which is being pondered and pondered… and pondered by lawmakers.  All of those hopes of finalizing a new relief bill yesterday seemed to fade as there appeared to be nary a stitch of progress made throughout the day.  The bill now appears to be 2 bills.  Bill number 1 includes stimulus for businesses and unemployment benefits.  Bill number 2 includes liability protections for businesses along with aid for states.  That second bill contains the sticking points, which are supposedly holding up the bigger deal from getting done. The markets have now factored in another virus surge and second round of stimulus.  If you thought that the looped video segments of healthcare workers getting the first wave of vaccines would inoculate the markets from negative sentiment… well, that is also already factored in.  So, all eyes are now on Capitol Hill.  If lawmakers are unable to strike a deal... stocks will likely be made to pay the ultimate bill.

THE MARKETS

Stocks had a mixed close yesterday, giving up early gains as virus cases and deaths continue to grow at an alarming rate. Traders went back to the familiar lockdown trades favoring tech and lockdown stocks while shunning value and cyclical ones.  The S&P500 slipped by -0.44%, the Dow Jones Industrial Average fell by -0.62%, the Russell 2000 Index added +0.11%, and the Nasdaq Composite Index climbed by +0.50%.  Bonds climbed and 10-year treasury yields were unchanged at 0.89%.

NXT UP

- Empire Manufacturing (Dec) is expected to have remained constant at 6.3.

- Industrial Production (Nov) may have grown by +0.3%, slower than the prior month’s 1.1% growth.

- The FOMC will start its 2-day meeting today and announce policy tomorrow.

daily chartbook 2020-12-15