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Week in Review: February 5, 2021

Recap & Commentary

US equity markets enjoyed their best week since November, encouraged by the prospects of additional fiscal stimulus. The S&P 500 and NASDAQ ended the week at new record highs. In Washington, President Biden remained committed to passing his $1.9T stimulus plan arguing that January’s weak employment report demonstrated the risk of doing “too little”. In preparation, the House and Senate passed a budget resolution that would allow Democrats to use reconciliation to pass the measure with a simple majority. Expectations are that the additional stimulus could be passed within a matter of weeks.

Oil reached a one-year high, aided by OPEC+ maintaining its current production cuts and the hope that new stimulus and the further rollout of vaccines will lead to increased demand in 2021.

After struggling through a surge in cases in November and December, new coronavirus cases in the US have dropped as the vaccine rollout begins to outpace the spread of the virus. On January 8, the country reported 260k new cases. By February 3, that figure had dropped 47% to 136k. On Thursday, Johnson and Johnson announced that it had submitted its one-dose vaccine candidate to the FDA for emergency use.

Through Friday, 59% of S&P 500 companies had reported fourth quarter earnings, with 81% beating their consensus estimate. Currently, fourth quarter earnings are expected to contract 2.4%, far better than the expected 9% decline estimated at the start of earnings season.

Economic Bullet Points

The week’s economic data provided mixed signals. While employment data was disappointing, manufacturing and services sector data was encouraging.

At the headline level, the January employment report was positive, with unemployment falling from 6.7% to 6.3%. However, similar to November’s report, the decline in the headline rate was driven more by individuals leaving the workforce (406k) than a sharp uptick in hiring. Household employment data used to calculate the unemployment rate showed 201k new jobs were added in January. Establishment data, i.e. nonfarm payrolls, showed a gain of just 49k jobs. Within that, private payrolls added a mere 6k jobs. Leisure and hospitality remained under pressure, losing an additional 61k jobs on top of the 536k lost in December. Revisions to prior data were also negative. December’s preliminary estimate of 140k jobs lost was revised down to 227k. In addition, cumulative job losses for March and April 2020, were revised downward by 884k, bringing total job losses during the two-month period to 22,362K.

ISM manufacturing data missed consensus expectations and slipped some from December levels, but remained solidly in expansion territory. Slowing new orders and production was partially offset by increased employment.

ISM services data exceeded consensus expectations and increased from December levels, propelled by new orders and employment, the latter of which moved back into expansion territory.

Of Note

Shares in GameStop, which rose as much as 2,700% at the height of its frenzy, fell 80% during the week, wiping $18B from the company’s market cap value.

Market Indices Week of 02/05

S&P 5004.7%
Small Caps7.7%
Intl. Developed2.7%
Intl. Emerging5.0%
Commodities3.0%
U.S. Bond Market-0.4%
10-Year Treas. Yield1.16%
US Dollar0.5%
WTI Oil ($/bl)$57
Gold ($/oz)$1,811

The Week Ahead

  • Small Business Optimism
  • Consumer Inflation (CPI)
  • Consumer Sentiment
  • Weekly Jobless Claims

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