The Market Today

President Signs Covid Stimulus; Cases Decline Along with Testing

by Craig Dismuke, Dudley Carter

CORONAVIRUS UPDATE (VS Coronavirus Chartbook – PDF)

While the number of confirmed Covid cases continues to rise at a discouraging rate, the rate has turned lower over the past week.  The current 7-day average for new cases in the U.S. has dropped to 183,965/day, down from a peak of 230,930.  Forty-six of 50 states show a lower 7-day average growth rate than their 14-day average rate. California has now overtaken Tennessee as the state with the fastest per capita growth of cases over the last seven days.  Similar to the Thanksgiving holiday, the number of tests reported also turned lower during the Christmas holiday.  Following the Thanksgiving holiday, cases ramped back up along with confirmed cases.  We will continue to watch to see if the same trend occurs following Christmas.  For now, with two vaccines being distributed and the case count dropping, the outlook is slightly improved.  On a negative note, the number of hospitalizations has not dropped in the U.S.


Quiet Week to End 2020: This week’s economic calendar is very light with only a handful of reports.  The Dallas Fed’s Manufacturing Index is the only report on the calendar today and is expected to decline from 12.0 to 10.2.


Shutdown Averted: The federal government will avoid a midnight shutdown after President Trump on Sunday signed the $2.4 trillion joint spending and relief bill, despite his public objections to many of the underlying details. The president had lobbied for $2,000 checks to individuals over the smaller $600 provision the bipartisan legislation calls for and said the funds provided for small businesses should be larger. His criticism extended to the broader spending bill and the size of the allocation of funds to certain line items, including in support of foreign countries. And while the risk of a shutdown has passed, spending will remain in the headlines. The House is planning a vote on a supplemental bill later today that would raise the total payment to Americans to $2,000 as the president requested. Additionally, reports indicate the president has hit pause on a couple of the components in the general budget bill and requested lawmakers to strike several line items his administration disagrees with.

Risk Assets and Yields Rise in Start to Final Week of 2020: Nonetheless, risk markets have improved to start the final week of an historic 2020 with the risk of millions of Americans losing emergency unemployment support avoided and the government now funded through September. U.S. equity futures were up more than 0.5% at 7:00 a.m. CT and crude prices had climbed roughly 1%. Gold was weaker, the Dollar was flat, and Treasury yields had moved higher and steeper. The 2-year yield had added 0.6 bps to 0.13% and the 10-year yield had risen 3.7 bp to 0.96%. Globally, some key markets remained closed for holidays. The U.K. is shut for Boxing Day, pushing any response to the final signing of the Brexit agreement late on Christmas Eve until Tuesday. Other European markets that were trading had gained 0.8% following a 0.4% improvement for MSCI’s Asia Pacific index.

ICYMI – December 25, 2020 Weekly Market Recap:
The net change last week for equities and Treasury yields fails to capture the level of uncertainty and anxiety investors faced on multiple fronts. On a positive note, Moderna’s vaccine began to be distributed across the country after the FDA granted it emergency approval over the weekend and Congress agreed Sunday on a $900 billion compromise stimulus agreement. However, markets tumbled sharply to start the week after many countries banned travel from the U.K. in an effort to keep out a new virus strain identified on the island. The virus worries added to concerns about Brexit negotiations which, prior to reaching an agreement late on Christmas Eve, appeared several times to be on the brink of breaking down. The uncertainty grew Tuesday after President Trump unexpectedly criticized the stimulus bill as a “disgrace”, saying Congress should increase the size of the checks to Americans from $600 to $2,000 and approve more money for small businesses. Without a new stimulus bill, the emergency unemployment support provided by the CARES Act will expire with 2020. While the weekly jobless claims data was better than expected, there were still more than 20 million Americans unemployed as of early December. More broadly, the economic data pointed to slowing consumer activity with housing cooling some from strong levels, consumer confidence proving weaker than expected, and personal income and spending both dropping more than anticipated. Business investment has so far trended better than hoped for in the fourth quarter but also showed a loss of momentum in November. For the week, the S&P 500 hardly budged while the 10-year Treasury yield inched 0.3 bps lower to 0.94%. Click here to view the full recap.

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