The Market Today
Important Week for COVID-19 Response, Cases Rising at Fastest Pace
by Craig Dismuke, Dudley Carter
CORONAVIRUS UPDATE (VS Coronavirus Chartbook – PDF)
THIS WEEK’S CALENDAR
Important Week for Vaccine, Stimulus, and Government Funding: The FDA will meet this Thursday to determine if it will grant emergency use authorization for the Pfizer / BioNTech vaccine. Also this week, Congress has until Friday to fund the government, with COVID-19 stimulus now seemingly attached to the effort. The details of the $908b stimulus proposed last week by a bipartisan group of lawmakers will be released today. As discussed in last Wednesday’s Market Today, the initial details indicated that the proposal included: $160 billion for state and local governments, liability protections for businesses, $288 billion for small businesses, $82 billion for schools, $25 billion in rental assistance, $180 billion to support extending expanded unemployment through March (including a $300 weekly federal supplement), and $17 billion for the airline industry. As for the economic data, we will see reports on small business confidence (Tue.), job openings (Wed.), CPI inflation (Thu.), and consumer confidence (Fri.).
Global Equities Remain Hesitant After Climbing to Records: The recent volatility for U.S. equities around record levels continues on Monday as investors reflect on last Friday’s disappointing payroll report and keep watch over the virus outbreak, vaccine developments, and renewed bipartisan interest in Washington for more stimulus. Stocks returned to records last week and longer Treasury yields hit their highest levels since March on the apparent progress towards a $1 trillion aid package that investors hope will float the economy until vaccines can begin to be distributed (more below). The search for a stimulus agreement will remain a primary focus this week with the U.S. government’s current spending authority set to expire on Friday. Several top lawmakers from both sides have indicated a desire to combine stimulus spending with an omnibus spending bill.
Brexit and U.S.-China Tensions Complicate an Already-Complex Outlook: Outside of the U.S., the British pound is notably weaker on Monday and U.K. government yields are leading a global decline as Brexit talks have hit a snag with the clocking ticking closer to the year-end deadline to strike an accord. Negotiators have sounded dour in recent days about the state of discussions, saying the other side must make concessions if a deal is to be found. British PM Johnson spoke with the European Commission President over the weekend and is scheduled to do so again later Monday. While the 1% decline for the British currency lifted the export-focused FTSE 100 by 0.4%, the rest of Europe was notably weaker, dragging the Stoxx Europe 600 down 0.4%. Asian stocks had declined 0.3% earlier, held back in part by renewed tensions between the U.S. and China over Hong Kong. U.S. futures were also down 0.3% and the 10-year Treasury yield had dipped 2.8 bps, although it remained near 0.94% at one of its highest levels since March.
ICYMI – December 4, 2020 Weekly Market Recap: Longer yields rose to their highest levels since March as a broadly weaker payroll report on Friday added to growing expectations that Congress may be pressured to coalesce around another aid bill. Stocks closed down Monday but the Dow wrapped up its best month since 1987 and the S&P 500 notched its strongest November in history following weeks of good news on vaccine progress. The biggest moves for stocks and yields, however, occurred on Tuesday and Friday. A group of Democrats and Republicans from both the House and Senate cobbled together a $908 billion aid bill that addressed sticking points for both sides, including money for state and local governments and virus-related liability protections for businesses. While no deal was finalized, top Democrats signaled support for the bill as a starting point for negotiations and President Trump indicated he would sign a deal if Congress was able to find one. While Thursday’s weekly jobless claims data were better than expected, Friday’s nonfarm payroll report was an undisputable disappointment. The 10-year yield, however, shot up to its highest level since March as investors bet the sharper-than-expected hiring slowdown, continued increase in long-term unemployment, and drop in participation may add additional pressure to Congress to quickly come to some agreement. For the week, the S&P 500 gained 1.7% to a new all-time high and the 10-year yield rose 13 bps. Click here to view the full recap.