Todd’s Take on the Market

Global equity markets were mixed last week as investors weighed the prospects of fiscal stimulus in the U.S. against extended lockdown measures to combat the pandemic. The S&P 500 ended the week down 1.46% after investors digested President-elect Biden’s proposed $1.9 trillion COVID-19 relief plan and attention turned to stimulus negotiations.

On Friday, investors got fresh looks at major banks such as JPMorgan Chase, Citigroup and Wells Fargo. JPMorgan reported better-than-expected earnings, but the stock fell more than 1%. Wells Fargo and Citigroup also declined 7.8% and 6.9%, respectively, even after posting earnings that beat analyst expectations.

In commodities—Oil prices rose early this past week as U.S. crude inventories fell more than expected and OPEC maintained its forecast for 2021 global demand to rise, led by a recovery in transportation and industrial fuels. However, surges in COVID cases and a drop in U.S. retail sales led WTI and Brent crude oil to end the week close to flat at $52.36 and $55.10 per barrel, respectively.

In the bond world—The U.S. 10-Year Treasury yields fell 1 basis point (bp) this past week as bond markets digested dovish comments from the FED that boosted inflation expectations and the unveiling of President-elect Biden’s new stimulus package. The new year has seen Treasury yields become increasingly sensitive to fiscal policy expectations rather than monetary policy alone.

The U.S. dollar index rose 0.82% last week, hitting a pause on the persistent decline seen during the last few months of 2020. Risk-off sentiment saw investors seeking safe-haven in the U.S. dollar, despite expanded vaccine rollouts and a call for another round of stimulus checks.

JOBS

The U.S. initial jobless claims surged to a seasonally adjusted 965,000 for the week ending January 9, the highest level since August, and significantly above expectations. The increase occurs as a sharp rise in coronavirus cases across the U.S. led to more containment measures.

INFLATION

The US Consumer Price Index (CPI) rose 1.4% year-over-year (YoY) in December, slightly above consensus expectations and an increase from November’s 1.2% print. Gasoline prices accounted for most of the monthly increase of 0.4%. Core CPI, which excludes the volatile food and energy components, rose 1.6% YoY.

MANUFACTURING

The U.S. Industrial Production (IP) increased 1.6% in December, higher than the +0.4% expected, but still below pre-pandemic levels. Utilities drove most of the gains, following a rebound in heating demand after November’s unseasonably warm weather.

So while the Impeachment process, pandemic levels, rising joblessness, rising interest rates and increasing inflation, stocks keep going up—it’s a honey badger market.

Stay tuned after this week with the inauguration, more economic data and more earnings, but we will be here to keep you posted.

Todd Day, MBA

Portfolio Manager
Horizon Financial Services, LLC

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