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Week in Review: December 11, 2020

Recap & Commentary

US equity markets ended the week mixed, as investors reacted to an apparent impasse in Washington over stimulus talks and the surge in coronavirus showed little signs of slowing. Hours after the S&P 500 posted its worst weekly decline since October, the Senate passed a stopgap funding bill to extend government funding by one week, thus avoiding a government shutdown, and allowing the two parties more time to craft a more comprehensive funding bill.

Abroad, UK Prime Minister Boris Johnson met with EU officials to try to finalize a Brexit deal. However, ongoing disagreements remain, including over fishing rights. While both sides have committed to continuing talks, increasingly they both seem prepared, or perhaps resigned, to the idea of the UK leaving the Union on December 31 without a deal.  Separately, Spain, Portugal, and Italy all issued debt at negative rates, a first for each country.

As expected, the FDA approved Pfizer’s COVID-19 vaccine for emergency use in people 16 years and older. The move comes as US daily new cases consistently exceed 200K and daily deaths have now surpassed 3K. The first of Pfizer’s vaccines are set to arrive in the US on Monday where 2.9M doses will be distributed to hospitals and long-term care facilities.

Economic Bullet Points

Economic news was headlined by inflation data which showed that it remains tepid, at best. An unexpected jump in unemployment claims reflected the economic impact of the current surge in coronavirus cases.

Headline consumer inflation (CPI) rose 0.2% in November, matching October’s increase and exceeding the forecast estimate of 0.1%. Compared to a year ago, headline inflation increased just 1.2%, again matching October’s increase. Core inflation posted similar results, increasing 0.2% and 1.6%, on a monthly and annual basis, respectively. Business inflation (PPI) corroborated the general lack of inflation as core PPI rose just 0.1% and 1.4%, on a monthly and annual basis, respectively. As we have discussed previously, for now the threat of rising inflation remain a non-issue for both the Fed and the broader economy.

A preliminary reading of consumer sentiment for December showed an unexpected uptick, led by improvements in consumers’ views on both current and future conditions. However, as with so many things these days, the underlying data showed meaningful differences between the political parties, with Democrats turning more optimistic and Republicans becoming more pessimistic. Given the current surge in coronavirus cases, and the attendant impact on the economy, sentiment may well turn lower again in the near-term.

Weekly jobless claims jumped by 137K to 853K, marking their largest weekly increase since late March, and highest level since September. With coronavirus cases surging and Congress deadlocked over additional stimulus, the concern is that employment conditions will continue to deteriorate.

Of Note

The highly anticipated IPOs of DoorDash (DASH) and Airbnb (ABNB) saw the two companies close up 86% and 113%, respectively, on their first days of trading. In a sign of investor excitement, and mistaken identity, call options of European industrial company ABB (ABB) saw outsized demand.

Market Indices Week of 12/11

S&P 500-1.0%
Small Caps1.0%
Intl. Developed-0.5%
Intl. Emerging0.5%
Commodities0.8%
U.S. Bond Market0.3%
10-Year Treas. Yield0.89%
US Dollar0.3%
WTI Oil ($/bl)$47
Gold ($/oz)$1,839

The Week Ahead

  • Empire Mfg. Survey
  • Philly Fed Mfg. Survey
  • Industrial Production
  • Retail Sales
  • Housing Starts
  • Weekly Jobless Claims
  • Mfg. & Services PMI

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