The Market Today

Happy New Year 2021; Good Riddance 2020

We review a tumultuous 2020 in our 2020 Year-in-Review (Video, PDF Slides). Looking forward, we will host our 2021 Economic Outlook Webinar next Tuesday, January 12.  During the presentation, we will discuss the forecast tension between the continued headwinds of the virus and the upside risk from the growing pent-up consumer demand. 

 

THIS WEEK’S CALENDAR

This week’s economic calendar is packed with events, including the highly consequential Senate runoffs tomorrow in Georgia. Today’s calendar will include the December Markit Manufacturing PMI final revision, November’s report on Construction Spending, and comments from three Fed officials (Evans, 9:00 a.m. CT), Bostic (9:00 a.m.), and Mester (11:15 a.m.).  The week will conclude with December’s jobs reports on Friday.  Nonfarm Payrolls are expected to rise just 62k, with the majority of economists participating in Bloomberg’s projections expecting between -55k to +150k.  Total nonfarm payrolls remain 9.8 million below their pre-virus peak of 152.5 million.

OVERNIGHT TRADING

Global Stocks Off to a Strong Start in the New Year: The optimism that lifted U.S. equities to records to close out 2020 (more below) has given global markets a jolt to new all-time highs to start the new year. Investors in recent days have looked through the current surge of infections and implementation of new restrictions, hoping support from fiscal and monetary policymakers will remain steadfast until the ongoing vaccine rollout can finally put the pandemic in check. Investors continue to watch the virus data for signs of post-holiday spikes and a slowing recovery is expected to be a theme in this week’s economic data, capped by a nonfarm payroll report that is expected to show job growth slowed to a crawl in December. Much of the drop in activity has resulted from new government restrictions and been centered in services sectors, as evidenced by stability, and even improvement, in a round of global manufacturing PMIs released earlier in the day. Not intended to provide an exhaustive list, there are currently ongoing discussions about new restrictions in Tokyo and extending restrictions in Hong Kong and Germany.

Investors Look to Better Days Ahead and Continued Support Until They Arrive: However, global stocks have started the new year with solid gains. MSCI’s Asia Pacific Index gained 0.8% to a record level and Europe’s Stoxx 600 was trading 1.5% higher. The U.K. began to roll out the Oxford-AstraZeneca shot on Monday and U.S. officials are considering ways to expedite its own roll-out after what has generally been considered a slower-than-expected start. New U.S. fiscal aid could soon provide support to the U.S. economy after the President signed a bipartisan aid package last week. The Fed’s Minutes on Wednesday should provide more color to their recent change of language that linked asset purchases to substantial improvement in activity. Despite some political uncertainty tied to Tuesday’s Senate run-off elections in Georgia, U.S. equity futures were up 0.4% and Treasury yields had inched higher. The 10-year yield was up 1.5 bps at 7:30 a.m. CT.

NOTEWORTHY NEWS

ICYMI – January 1, 2021 Weekly Market Recap: Markets capped off a calamitous year with a quiet week of trading as investors broke away early to ring in a new year that couldn’t possibly be as eventful and exhausting as 2020. Right? The S&P 500 rose 1.4% with a large portion of the gain occurring Monday after President Trump reluctantly signed the $900 billion bipartisan stimulus package as part of a broader $2.3 trillion spending bill. The bill prevented a government shutdown and, among other stimulus measures, extended emergency unemployment assistance through mid-March. The House quickly responded to the president’s request to increase the size of direct payments to individuals by passing a bill to add $1,400 to the agreed-upon $600 amount. However, Senator Schumer’s efforts to quickly pass the measure by unanimous consent was blocked by Senator McConnell who said the Senate wouldn’t be “bullied” into bigger payments. Instead, he indicated the measure would be considered alongside other unrelated requests of the president in a single bill at a later date. In the U.K., parliament finally put the Brexit deal negotiations behind it by passing the Christmas-eve trade agreement late Wednesday. However, there continued to be concern about a mutated virus strain in the U.K. that was also identified in the U.S. on Tuesday. The new strain, which scientists say is significantly more infectious but may not be more severe, has led to a rapid rise of new infections and new restrictions across England. More encouragingly, the U.K. government approved the homegrown Oxford-AstraZeneca vaccine for emergency use beginning today. The 10-year Treasury yield dipped 1.0 bps to 0.91%. Click here to view the full recap.