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Last Saturday the U. S. Congress passed a 1.9 trillion dollar stimulus package. Will this be enough to get the market back on track. For the past two weeks, we have seen the market whip back and forth. The Nasdaq has been the hardest hit. Down -6.6% in the last month while the Dow and S. P. 500, increased 1.4% and decreased only .8% respectively.
The market responded to the 10Y rate that is resting at 1.55% last Friday. Increasing from next to nothing in the last year. This rate increase will cause the Fed to react in some way. Perhaps they did on Friday when the S. P. raised up 3% from the low to finish at 3840.38.
Looking at the Sectors,
Energy was the winner this week. WTI oil has increased to 66.26 a 3.6% increase in one day. From last year’s dip into negative territory, Oil has made a comeback.
Consumer Discretionary Spending has lacked YTD trailing the S. P. by ~4.00%.
Happy Monday. Good Luck out there this week.
Global Spotlight
Indian farmers protests in New Delhi on Republic Day. Indian farmers will intensify protests on India’s Republic Day, on Jan. 26, in New Dehli after an 11th round of talks between farmers and the government failed to produce an agreement on the implementation of controversial agricultural laws.
Greece and Turkey to discuss Eastern Mediterranean issues. Greek and Turkish officials will meet in Istanbul on Jan. 25 to discuss their conflicting territorial claims in the Eastern Mediterranean.
The Communist Party of Vietnam’s 13th National Congress. From Jan. 25 to Feb. 2, the Party will decide on new leadership and its next five-year plan. Decisions over who will hold Party and state leadership decisions will take center stage, particularly given that numerous Politburo members will be retiring.
Stratfor.com
Economic Calendar
Briefing.com has a good U.S. economic calendar for the week. Here are the main U.S. releases.
Reports to watch this week.
- CPI anmd PPI
- JOLTS
Briefing.com
Last Weeks Numbers
Review Last weeks numbers here.
Earnings
Source I/B/E/S data from Refinitiv
Aggregate Estimates and Revisions
- 20Q4 earnings are expected to be 4.1% from 19Q4. Excluding the energy sector, the earnings growth estimate is 8.1%.
- Of the 495 companies in the S&P 500 that have reported earnings to date for 20Q4, 79.4% have reported earnings above analyst expectations. This compares to a long-term average of 65% and prior four quarter average of 76%.
- 20Q4 revenue is expected to be 2.7% from 19Q4. Excluding the energy sector, the growth estimate is 6.0%.
- During the week of Mar 8, four S&P 500 companies are expected to report quarterly earnings.
Thought of the week
As the economy continued to slowly reopen in February, the ISM U.S. Manufacturing PMI came in at 60.8, indicating the strongest output growth since 2018. Even more notable, however, the ISM Prices Paid Index climbed to a decade high of 86, indicating rising inflation pressures. The shortage of certain key materials and businesses taking the opportunity to rebuild margins have boosted prices higher and lengthened lead times, as is evidenced by the Supplier Deliveries Index reaching 72 in February. In contrast to the manufacturing survey, the ISM Services PMI showed subdued activity in February due to the continued lockdown and cold weather conditions. Fortunately, the economic reopening should fuel a strong resurgence in the services economy in the coming months. However, this surge could exacerbate the pressure on prices as the services sector has also witnessed higher inflation pressures, with the services sector Prices Paid Index jumping to 71.8 in February. As vaccine distribution ramps up and states lift business restrictions, the stimulus-fueled demand surge will confront a supply-constrained economy and lead to higher inflation in the coming months. While this is not necessarily a risk for stocks yet, increased inflation expectations continue to boost long-term rates. Because of this, investors should manage fixed income duration carefully and may want to consider rotating into value-oriented names.
– JP MOPrgan
