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2020 Financial Markets Update

Week in Review: January 8, 2021

January 11, 2021

Recap & Commentary

Markets ended the first week of 2021 at all-time highs after President-elect Biden called for trillions of dollars of additional stimulus amidst a turbulent week punctuated by a bleak December jobs report and a siege of the US Capitol. Small cap stocks notched their best week since April and Saudi Arabia announced a surprise production cut of 1 million barrels per day, causing oil to rise above $55 for the first time since February. Treasury yields reached their highest levels since March following Democrats’ victories in Georgia runoff elections that gave the party control of the Senate.

Despite considerable disruption in Washington on Wednesday, president-elect Joe Biden was officially declared the winner of the 2020 Presidential election. Fallout from Wednesday’s activities continued through the weekend with most social media companies eliminating access to large portions of the political spectrum.  Wall Street appeared to largely ignore the unrest in Washington.

The coronavirus continued as the US suffered 4,000 coronavirus deaths in a single day for the first time since the pandemic began after America fell short of its goal to vaccinate 20M people in December. So far, only 6M people have been vaccinated, although the US is making up for lost time, vaccinating 600k Americans in less than 24 hours on Thursday.

Economic Bullet Points

Though largely overshadowed by the events in Washington, D.C., the week’s economic news was headlined by the December employment report.  Other data provided insight into the state of both the manufacturing and services sectors.

After seven consecutive months of gains, nonfarm payrolls contracted for the first time since April, losing 140K jobs.  The consensus forecast had been for a 71K gain. The decline was widely attributed to states and municipalities reinstating various measures to try to stop the surge in new coronavirus cases.  That was clearly seen in the loss of 498K leisure and hospitality jobs, with 75% of the losses concentrated in food services and drinking places.

According to industry group ISM, December manufacturing activity surprised to the upside, accelerating to its fastest pace since August 2018, and second fastest pace since 2004. Underlying strength was broad based with nearly every sub-component showing improvement, including employment, which returned to growth in December. That marked just the second time since January 2018 that payrolls increased on a net basis.

Like manufacturing, the services sector continued to expand in December. However, unlike manufacturing underlying conditions were more mixed. While production and new orders both improved, employment fell back into contraction territory, corroborating data in the December unemployment report.

Of Note

U.S. bankruptcies reached near-record levels in 2020, with 244 total filings.  That marked the most since 2009, when 293 filed. The energy, retail, and consumer sectors saw the most filings, with notable names such as JC Penney, Neiman Marcus, and 24 Hour Fitness all seeking protection from creditors.

Market Indices Week of 01/08

S&P 5001.8%
Small Caps5.9%
Intl. Developed3.1%
Intl. Emerging4.8%
U.S. Bond Market-0.8%
10-Year Treas. Yield1.12%
US Dollar0.2%
WTI Oil ($/bl)$52
Gold ($/oz)$1,845

The Week Ahead

  • Small Business Optimism
  • Consumer Inflation (CPI)
  • Business Inflation (PPI)
  • Retail Sales
  • Industrial Production
  • Consumer Sentiment
  • Weekly Jobless Claims

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