The Market Today
Stimulus Discussions Continue; Markets Continue to Watch Frenzy
by Craig Dismuke, Dudley Carter
THIS WEEK’S CALENDAR
This week will bring some important economic reports including the January’s ISM reports on manufacturing (Mon.) and services (Wed.), auto sales for the month of January (Tue.), and the January BLS jobs data (Fri.). It is expected that the labor market had another soft month after losing 140k jobs in December. There is a blizzard of Fedspeak with investors focused on when they might begin to slow asset purchases. Kashkari, Kaplan, and Bostic all speak today. Also on the watchlist for the week, the recent market excitement over GME, AMC, and others (more below); and corporate earnings reports.
CORONAVIRUS UPDATE (VS Coronavirus Chartbook – PDF)
Moderate Republicans Ask President Biden for a Meeting on Stimulus: Over the weekend, a group of Republican Senators sent a letter to President Biden pointing out areas of agreement for more stimulus and asking the president to work with them towards a compromise agreement. Republicans have balked at the size and scope of the president’s $1.9 trillion American Rescue Plan so soon after $900 billion in new aid passed Congress in late December. The letter points out that the stimulus from that bill is just now making its way into the economy, as seen in last Friday’s personal income data.
Retail Investors Add Silver to the Target List: Chatter about GameStop’s eye-watering surge remained a top trend on social media platforms over the weekend and in the online forums where retail investors’ interest in the stock was first peaked. However, shares of the company had slipped 2% ahead of U.S. trading. While more volatility Monday has likely just been delayed until deeper in the U.S. session, the effects of retail momentum was already showing up in the price of silver. Spot prices for the precious metal, the most recent target of online investors, rose around 10% Monday to break above $30 per ounce, the highest level since 2013. And while the price of a share of GameStop or a troy ounce of silver may dominate the market headlines Monday, there are also more fundamental economic issues afoot.
Expectations for even more stimulus had supported markets before the retail frenzy erupted last week, causing some market disruption. Global markets were again moving higher Monday, with Asian stocks up 1.6% and European equities 1.4% higher. China’s PMIs slowed in January but held in expansionary territory. U.S. futures were stronger by between 0.8% and 1.1%. Global sovereign yields had inched higher and steeper, with the 10-year Treasury yield up 1.2 bps to 1.08% at 7:30 a.m. CT.
ICYMI – January 29, 2021 Weekly Market Recap: The economy grew 4.0% in the fourth quarter of 2020, less than the 4.2% expected, and contracted 2.5% for the full year compared to the fourth quarter of 2019, a less-severe result than feared early in the pandemic. In other weekly reports, new home sales finally rose and prices hit a new high since 2013. Personal spending cooled again but incomes were boosted by wage gains and early signs of the effects of December’s $900 billion stimulus bill, a combination that boosted the savings rate. Continuing jobless claims were skewed again by reporting volatility but new claims improved. There were positive developments on the vaccine front but continued concerns about new virus strains. The Fed met, but didn’t say much new other than pointing out that the recovery had moderated and the outlook would depend on the success of vaccine rollouts. However, the market focus was on a retail frenzy that sent shares of GameStop soaring. The targeted hedge funds scrambled to cover sharp losses and online brokerages limited trading in the names, drawing the ire of the retail crowd and members of Congress. The S&P 500 dropped 3.3% for the week, its biggest loss since October. The 10-year Treasury yield dipped 2.0 bps to 1.07%. Click here to view the full recap.