The Market Today

CORONAVIRUS UPDATE (VS Coronavirus Chartbook – PDF)

Monitoring the Virus Headlines: The number of countries finding cases of the U.K. virus variant continued to grow Tuesday and now includes the United States. Colorado’s governor said the state had identified a resident infected with the new strain of the virus that scientists say is significantly more infectious. Away from the medical news, most of the focus remained on the Senate’s plan for a bill that would add $1,400 to the $600 stimulus checks included in the latest aid package. The House approved the higher payment on Monday and President Trump has staunchly supported the increase. An attempt by Senator Schumer to fast-track the legislation through the Republican-led chamber was foiled by an objection from Senate Majority Leader McConnell. The bill is not dead, however, with Senator McConnell saying it could be considered later this week. Related to the $600 checks that were agreed to as part of the Consolidated Appropriations Act of 2021, Treasury Secretary Mnuchin said paper checks would begin to be mailed out today.

TODAY’S CALENDAR

Goods Trade Flows Shows U.S. Recovery: The Advance Goods Trade Balance for November showed a larger-than-expected deficit, increasing from $80.3b to $84.8b. This marks the largest monthly trade deficit on record.  Driving the larger goods deficit was a $5.46b increase in imports and a $1.05b increase in exports.  While the larger deficit will detract from the 4Q GDP tally, the resumption of global trade is a positive development.  Overall U.S. goods trade volume in November rose $6.5b, or 2.0%.  The imbalance between imports and exports, however, reflects the global reality that the U.S. is recovering from the Covid shutdowns more quickly than other countries.  U.S. goods imports are now above their pre-virus level while goods exports remain 7.6% below their pre-virus level.

Inventories Mixed: Also released this morning, retail inventories showed a strong gain in November, up 0.7% MoM after October’s 0.9% gain.  However, wholesale inventories disappointed by declining 0.1% in November.

Pending Home Sales: The November Pending Home Sales report (9:00 a.m. CT) is expected to show homes going under contract for sale to be unchanged for the month.

YESTERDAY’S TRADING

Stocks Dropped as Larger Stimulus Checks Hit Senate Speed Bump: Despite the Nasdaq registering a new all-time high on Tuesday, the Dow and S&P 500 slipped away from record levels after the expected difficulties in pushing larger stimulus checks through the GOP-led Senate materialized. After opening higher amid a strong global session, the S&P 500 dipped into negative territory after Senate Majority Leader McConnell blocked an attempt by Minority Leader Schumer to hold a unanimous consent vote and quickly pass the House’s bill to increase the size of the individual checks. Senator McConnell said the plan for larger checks will likely be considered alongside other requests of the president later in the week, but didn’t provide a more detailed timeline. The S&P 500 floundered throughout the afternoon to finish the day down 0.2%. Treasury yields dropped with equities midday but recovered some ground to close with modest gains. The 2-year yield closed flat while the 5-year (0.38%) and 10-year (0.94%) yields both rose 1.3 bps.

OVERNIGHT TRADING

U.K. Approves Domestically-Developed Vaccine and Expected to Finalize Trade Agreement with the EU: Foreign equities were mixed Wednesday following prior-day declines in the U.S., which may be partially unwound at the start of the U.S. session based on modest gains for equities index futures. The lack of a daily consensus market direction as 2020 nears its end comes as investors look back on an unusually stellar year for equities amid the worst recession since the Great Depression and ahead for any new developments that could help shape the path of economic recovery. The MSCI Asia Pacific index rose 0.8% on Wednesday despite mixed underlying results for national indices while the Stoxx Europe 600 was back to flat after erasing gains accumulated during the first half of the trading session. U.K. stocks were marginally positive after the country’s medical regulator approved the Oxford-AstraZeneca vaccine for emergency use, one of the few notable headlines in an otherwise quiet day for news. Also propping up optimism in the U.K., the country’s parliament is expected to approve the recently-announced trade accord with the EU with just hours left before the transition period expires. At 7:36 a.m. CT, Treasury yields were less than 0.2 bps changed across the curve and futures on the three major equity indices were up between 0.2% and 0.4%.