Oh, what a feeling. Stocks rose to new heights yesterday as lawmakers inched yet closer to a new stimulus package. Exuberance over new stimulus won out over disappointing job numbers.
N O T E W O R T H Y
Climb every mountain. Positivity is in the air! Can you feel it? You feel as if you can just pull your office blinds up, swing open your window, poke your head out and take deep breaths of Spring-filled, fresh air, while the birds sing and the flowers bloom. You would think that if you watched the stock indexes all rush to new highs yesterday. Go ahead and pull up the blinds... but don’t open the window. I see bare trees and snow under grey skies. It is quiet but for the occasional crow's caw that punctuates the steady, numbingly cold breeze. Of course, I live in the Northeast where we were just hit by a monstrous nor’easter, which sort-of helped me create the aesthetic I am now presenting to you. It’s not all bad of course. The probability of an elusive white Christmas is high, so I suppose we can call that a silver lining. Norman Rockwell paintings aside, we have had some positive news to hang our rally on. People are getting inoculated on TV and we see cargo crates filled with Pfizer’s vaccine being unloaded from trucks and airplanes. More vaccine is on the way! Last night WHILE YOU SLEPT the FDA independent counsel recommended the approval of the Moderna vaccine which may get final approval today. BRING IT ON! Lawmakers appear to have reconciled some differences and may be on the verge of passing a slimmed-down stimulus package. That package is said to include a $600 stimulus check for individuals who qualify, $350 billion for small businesses, extended unemployment benefits, and more funding for vaccines. Hopes are that Congress can get something approved today or over the weekend. There is a big incentive as lawmakers are set to leave DC for the holidays. Another big incentive is a looming shutdown, TODAY, so a budget must also be passed. BRING IT ON! There are some conflicting projections, but it seems that most experts predict that enough Americans will receive the vaccine to achieve herd immunity by next summer sometime, so by this time next year the economic floodgates should be wide open. All that stimulus and future stimulus expected from the Biden administration will be swirling around. The Fed has pledged to stay out of the way and is willing to accept more inflation. Theoretically, things could be quite positive for the economy. We may be off by a month or two, but it does seem plausible. But let’s focus on the road in front of us and worry about our destination later. Christmas and New Years is right around the corner and health experts are warning that get-togethers will cause another surge in viruses. Interestingly, those health experts' predictions have been pretty accurate heretofore. The current surge resulted from the onset of cold weather and Thanksgiving socializing. As a result, more shutdowns appear likely in the new year. Additional restrictions will almost certainly further curtail the recovery with increasing job losses. We can already observe the effects of recent restrictions in the weekly Jobless Claims data which yesterday, showed that 885k initial claims were filed last week. The number was quite a bit higher than economists expected and represents an increase from the prior week’s 862k claims. Yes, vaccinations are here and ramping up, BREXIT may actually happen with a negotiated deal, and Congress may agree on a stimulus bill, but we still have one more very high mountain to climb before we can get to that place we are all longing for, a return to normalcy. It is still too early to predict exactly when, which actual month that will happen in, but it is important to remember that Spring always follows Winter. The birdsong, butterflies, and regrowth will come again, sure enough. If you’ll excuse me, I have to now go and shovel my car out, scrape the ice off my windshield, and throw some salt on my walkway.
THE MARKETS
Stocks rose yesterday, taking a cue from lawmakers, who appear to be zeroing in on a new stimulus bill. The S&P500 climbed by +0.58%, the Dow Jones Industrial Average traded up by +0.49%, the Russell 2000 Index surged by +1.30%, and the Nasdaq Composite Index added +0.84%. Bonds rose as well and 10-year treasury yields added +2 basis points to 0.93%.
NXT UP
- Leading Index (Nov) is expected to have grown by +0.5%, slower than the +0.7% in the prior month.
- Today is Quadruple Witching which means that stock index futures, stock index options, stock options, and individual stock futures all expire today. The event typically causes volatility. Tesla will be added to the S&P500.
- Next week’s compacted calendar includes GDP, Consumer Confidence, Existing Home Sales, Durable Goods Orders, Personal Income/Spending, PCE Deflator, housing numbers, and University of Michigan Sentiment. Check back on Monday for calendars and details.