Market Recap - New Year Kicks Off With Huge Gains In Small-Caps And Energy Stocks

The Record-Setting Run That Ended 2020 Carried Over To The Start Of 2021 As Each Of The Major Indices Set Intraday And Closing Record Highs. The Russell 2000 Was The Hero This Week With A 5.9% Gain, Followed By The Nasdaq Composite (+2.4%), S&P 500 (+1.8%), And Dow Jones Industrial Average (+1.6%).

The S&P 500 topped the 3800 level, the Dow topped 31,000, the Nasdaq topped 13,000, and the Russell 2000 (briefly) topped 2100.

The positive momentum was aided by expansionary December manufacturing PMIs out of the eurozone, Asia, and the U.S.; expectations for more fiscal stimulus after Democrats clinched control of Congress after flipping both Senate seats in Georgia; Saudi Arabia agreeing to cut an additional 1 million barrels/day in February and March; and Tesla (TSLA) reporting record Q4 deliveries.

The energy sector rallied 9.3% amid sharply higher oil prices ($52.25/bbl, +3.98, +8.3%) while the materials (+5.7%), financials (+4.7%), and consumer discretionary (+3.8%) sectors advanced between 3-6%. The counter-cyclical real estate (-2.6%), consumer staples (-1.0%), utilities (-0.7%), and communication services (-0.3%) sectors finished in negative territory.

The tech sector received solid support from its semiconductor components. The Philadelphia Semiconductor Index advanced 5.0% this week.

Notably, the market was able to look past the political unrest in D.C. and a weak December employment report, which showed payrolls unexpectedly decline.

The 10-yr yield rose 19 basis points to 1.11% amid increased selling interest, which benefited bank stocks but weighed on gold prices ($1836.70/ozt, -$57.00, -3.0%).

Market Recap-2020 ENDS WITH STOCK MARKET AT ALL-TIME HIGHS

The Large-Cap Indices Set Fresh Intraday And Closing Record Highs In The Last Week Of The Year. The S&P 500 (+1.4%) And Dow Jones Industrial Average (+1.4%) Both Increased 1.4%, And The Nasdaq Composite Gained 0.7%. The Small-Cap Russell 2000, However, Pulled Back From Record Territory With A 1.5% Decline.

Besides momentum, which was arguably the main driver, supporting factors this week included President Trump signing the $900 billion stimulus and omnibus spending bill, and the UK approving the COVID-19 vaccine from AstraZeneca (AZN) and Oxford for emergency use. Neither were particularly surprising, but the news was good for sentiment reasons.

Ten of the 11 S&P 500 sectors contributed to the advance. The consumer discretionary (+2.0%), communication services (+1.9%), financials (+1.9%), health care (+1.9%), and utilities (+2.5%) sectors outperformed the benchmark index. The energy sector (-0.4%) was the lone holdout and ended the year with a 37.3% decline.

Unsurprisingly, the market wasn't bothered by Senate Majority Leader McConnell saying that the $2000 stimulus checks (an increase from $600) have "no realistic path" to quickly pass in the Senate. It could be taken up in the new Senate in January, but that's an issue for the new year.

The 10-yr yield declined one basis point to 0.92%, leaving it down 100 basis points for the year.

It's also worth mentioning that the S&P 500 ended the year with a 16.3% yearly gain, which was more than the Dow (+7.3%) but less than the Nasdaq (+43.6%) and Russell 2000 (+18.4%).

Market Recap - Tech Stocks and Small-Caps End Week as Winners

Each Of The Major Indices Set Fresh All-Time Highs This Week In A Continuation Of The Market's Positive Trend. The Nasdaq Composite (+3.1%) And Russell 2000 (+3.1%) Both Advanced 3.1%, While The S&P 500 (+1.3%) And Dow Jones Industrial Average (+0.4%) Finished With More Modest Gains.

As expected when the Nasdaq noticeably outperforms, the information technology sector (+3.2%) claimed the top spot in the S&P 500, followed by consumer discretionary (+2.3%) and materials (+1.9%). The energy (-4.3%) sector succumbed to profit-taking interest with a 4.3% decline, and the communication services sector (-0.5%) was the one other negative sector.

Positive factors throughout the week included news that a stimulus deal is close to being reached, the Fed affirming its "extraordinarily accommodative" policy stance, the Pfizer (PFE)-BioNTech (BNTX) coronavirus vaccine rolling out in the U.S., and news that Apple (AAPL) is planning to increase iPhone production by 30% yr/yr in the first half of 2021.

To be more specific, the size of a potential stimulus deal is looking to be around $900 billion, although negotiations extended into the weekend amid continued disagreements. The Fed committed to purchasing at least $120 billion of Treasury and mortgage-backed securities per month until substantial progress has been made with respect to employment and inflation targets.

The Fed's stance helped investors overlook relatively disappointing retail sales data for November and higher weekly initial claims, and it also put downwards pressure on the U.S. Dollar Index, which fell to its lowest level since April 2018.

The 10-yr yield increased six basis points to 0.95% amid increased selling interest in part due to the Fed's dovish policy and expectations for new supply of Treasuries needed to finance a potential stimulus deal.

Market Recap - November Bullish Momentum Carries into December

Each Of The Major Indices Set All-Time Highs This Week, Powered Higher By Growth Stocks And Value Stocks Alike. The Nasdaq Composite Claimed The Winning Spot With A 2.1% Gain And Was Followed By The Russell 2000 (+2.0%), S&P 500 (+1.7%), And Dow Jones Industrial Average (+1.0%).

Nine of the 11 S&P 500 sectors contributed to the advance. The energy sector rallied 4.5%, and the information technology sector rose 2.8%. The utilities sector (-2.2%) was the weakest link by a wide margin.

There was no one specific catalyst that propelled stocks higher. Rather, it was the positive cumulative effect that the week's developments had on an already bullish investor mindset that could best explain the gains. In simpler terms, the market rode a bullish momentum.

Stimulus talks were renewed. Moderna (MRNA) said its vaccine was 94.1% effective in preventing COVID-19 and 100% effective in protecting against serious outcomes. Pfizer (PFE) and BioNTech (BNTX) received emergency approval for their COVID-19 vaccine in the UK. Apple (AAPL) and Tesla (TSLA) were upgraded to Buy ratings by a couple of analysts.

Regarding stimulus talks, Democratic Congressional leadership and some Republicans supported a proposed $908 billion bipartisan stimulus bill as a starting point for negotiations. House Speaker Pelosi spoke with Senate Majority Leader McConnell about attaching a smaller stimulus deal to the year-end spending bill.

It's not for certain that the mixed November employment report, which highlighted slower jobs growth, pushed lawmakers over the edge on Friday, but the market reacted as if the report had some negotiating power.

In the Treasury market, the 2s10s spread widened by 14 bps to 83 bps, reaching its highest level since late 2017 in an affirmation of the market's upbeat economic outlook. The 10-yr yield finished the week 13 basis points higher at 0.97%. The U.S. Dollar weakened by 1.0% to 90.82 to reach its lowest level since April 2018.

Separately, Salesforce (CRM) confirmed it agreed to acquire Slack (WORK) in a cash-and-stock deal with an enterprise value of about $27.7 billion. CRM shares fell 9% this week given the hefty price tag.

Market Recap - DOW Hits 30K And Other Milestones

Each Of The Major Indices Rose More Than 2.0% This Shortened Week And Set New Record Highs, Including The Dow Jones Industrial Average (+2.2%), Which Crossed Above 30,000 For The First Time Ever. The Russell 2000 Rose 3.9%, The Nasdaq Composite Rose 3.0%, And The S&P 500 Rose 2.3%.

Value, cyclical, and small‐cap stocks retained their leadership roles in this part of the bull market. The S&P 500 energy sector rose 8.5%, and the financials sector rose 4.6%. Every other sector, except real estate (‐0.4%), ended the week with gains.

Positive catalysts included news that Joe Biden will nominate former Fed Chair Janet Yellen as Treasury Secretary, the General Services Administration saying it will release funds to help the Biden administration transition into office, and more upbeat vaccine/treatment updates for COVID‐19.

Regarding the latter, AstraZeneca (AZN) and the University of Oxford said their vaccine has an efficacy rate of up to 90%, and Regeneron Pharma (REGN) said it received emergency use authorization from the FDA for its antibody cocktail. Note, AstraZeneca acknowledged at the end of the week that it made a dosage mistake in its trials, likely prolonging federal approval in the U.S.

The bullish price action continued to feed on itself, contributing to a fear of missing out on further gains and parabolic moves in some parts of the market. Tesla (TSLA) surged 20% this week, and Palantir (PLTR) surged 52%. 

The 10‐yr yield Treasury note yield edged higher by two basis points to 0.85% ahead of the bond market close on Friday.

Market Recap - Another Winning Week for the Small-Caps

Cyclical Stocks Retained Their Monthly Leadership Roles This Week Following Several Positive Vaccine Developments, But The S&P 500 (-0.8%) And Dow Jones Industrial Average (-0.7%) Finished In Negative Territory. The Russell 2000 Climbed 2.4%, And The Nasdaq Composite Increased 0.2% Despite Relative Weakness In The Technology Stocks.

Briefly, Pfizer (PFE) and BioNTech (BNTX) filed for emergency use authorization for their COVID-19 vaccine after concluding their Phase 3 study, which indicated that their vaccine is 95% effective; Moderna (MRNA) said its vaccine is 94.5% effective; and AstraZeneca (AZN) and Oxford's vaccine showed encouraging immune responses in older patients in Phase 2 data. 

The S&P 500 energy sector set the performance pace with a 5.0% gain to extend its monthly gain to 23%. The industrials (+1.1%), materials (+1.1%), and financials (+0.5%) sectors followed suit, and the Philadelphia Semiconductor Index (+1.9%) and the SPDR S&P Retail ETF (XRT, +5.5%) were other pockets of strength this week.

The semiconductor space was fueled by news that Taiwan Semi (TSM) is expanding production capacity to meet high demand from chip companies. The retail space drew support from a host of better-than-expected earnings reports from retailers like Walmart (WMT) and Target (TGT). 

Conversely, the information technology sector (-0.9%) was an influential drag on index performance, and the counter-cyclical utilities (-3.9%), health care (-3.0%), and real estate (-1.7%) sectors declined noticeably.

Separately, Boeing (BA) shares gained 7% in part due to the FAA approving the 737 MAX safe to fly again, Tesla (TSLA) shares surged 20% on news it will be added to the S&P 500 on Dec. 21, and Walgreens Boots Alliance (WBA) shares fell 12% following the launch of Amazon's (AMZN) online pharmacy business.

The 10-yr yield fell six basis points to 0.86% amid increased demand despite the encouraging vaccine news. 

Market Recap - A Rally on Monday Leads to Four Days of Consolidation as Earnings Season Begins

The Large-Cap Indices Ended The Week Higher But Noticeably Lower Than Where They Were At Monday's Highs (Before Earnings Season Started). The Nasdaq Composite Advanced 0.8%, While The S&P 500 (+0.2%) And Dow Jones Industrial Average (+0.1%) Eked Out Smaller Gains. The Russell 2000 Decreased 0.2%. 

There was no clear sector leadership this week with five S&P 500 sectors finishing higher between 0.7% (consumer staples) and 1.1% (industrials). At the other end, the energy (-2.1%) and real estate (-2.3%) sectors declined more than 2.0%, followed by financials (-0.9%). 

Growth-oriented stocks, however, did secure the slight advantage, evident by the outperformance of the Nasdaq Composite. That might have been due to the negative-sounding developments throughout the week. 

Starting with earnings, the big banks and the top health care companies kicked off the Q3 earnings-reporting season, and the reactions to their reports were generally lackluster or disappointing. JPMorgan Chase (JPM), Citigroup (C), and Goldman Sachs (GS) for their part issued cautious-minded commentary about the economic outlook.

In addition, investors had to contend with Johnson & Johnson (JNJ) and Eli Lilly (LLY) pausing their vaccine/antibody trials, lawmakers reaching an impasse on fiscal stimulus, weekly jobless claims increasing by 53,000 to 898,000 (Briefing.com consensus 830,000), and Europe announcing renewed lockdown measures due to a second wave of the coronavirus. 

These events came in the midst of a three-day losing streak in the S&P 500, which was ultimately snapped on Friday after retail sales for September increased more than expected and it was reported that Pfizer (PFE) may file for emergency use authorization for its COVID-19 vaccine candidate by the end of November. 

It's worth pointing out, however, that the S&P 500 was up as much as 10.6% on Monday from its low on Sept. 24. The benchmark index ended that day with a 1.6% gain, and no progress was made after that. With all these events in mind, it's reasonable to posit that the market may have just needed some time to consolidate those gains. 

The 10-yr yield decreased four basis points to 0.74%. The U.S. Dollar Index advanced 0.7% to 93.71. WTI crude futures increased 0.5% to $40.85/bbl.

Market Recap - A Week to Remember for the Small-Caps

Technology Stocks Performed Well This Week But Not As Well As Many Small Cap/Value/Cyclical Stocks, As Investors Felt More Confident In A Recovery. The Russell 2000 Rallied 6.4%, Comfortably Outpacing The S&P 500 (+3.8%), Nasdaq Composite (+4.6%), And Dow Jones Industrial Average (+3.3%).

Highlighting the week's biggest stories: President Trump essentially recovered from the coronavirus, removing some political uncertainty. The White House was reportedly drafting a $1.8 trillion stimulus bill, bolstering relief expectations. Eli Lilly (LLY) and Regeneron (REGN) requested emergency use authorization for their COVID-19 antibody treatments, potentially aiding consumer sentiment.

The market rose four of the five days, and every sector in the S&P 500 ended the week in positive territory. The materials (+5.1%), energy (+5.0%), information technology (+4.6%), and utilities (+4.6%) sectors advanced more than 4.0%, while the real estate sector underperformed with a 1.4% gain. 

The semiconductor space was boosted by Taiwan Semiconductor (TSM) reporting strong revenue growth in September, NXP Semi (NXP) raising Q3 revenue guidance above consensus, and news that Xilinx (XLNX) is in talks to be acquired by AMD (AMD) for $30 billion. The Philadelphia Semiconductor Index surged 8.0%. 

The one day the market closed lower was when President Trump said he called off stimulus negotiations until after the election. He later clarified that he still wanted stimulus but in the form of standalone bills for airlines, small businesses, and households -- this was ultimately superseded by the $1.8 trillion news at the end of the week. 

U.S. Treasuries declined amid the risk-on mindset among investors, pushing yields higher in a curve-steepening trade. The 2-yr yield increased three basis points to 0.16%, and the 10-yr yield increased eight basis points to 0.78%. The U.S. Dollar Index fell 0.9% to 93.06. WTI crude futures rose 9.9%, or $3.59, to $40.64/bbl.

Market Recap - Stocks Rebound in Politically-Minded Week

The S&P 500 (+1.5%) And Dow Jones Industrial Average (+1.9%) Snapped Four-Week Losing Streaks This Week, And The Nasdaq Composite Performed Comparably With A 1.5% Gain. The Real Winner, However, Was The Russell 2000 With A 4.4% Gain.

Ten of the 11 S&P 500 sectors finished in positive territory. The real estate (+4.9%), financials (+3.3%), utilities (+3.3%), and consumer discretionary (+2.5%) sectors outperformed. The energy sector (-2.9%) was the lone holdout, as sentiment was pressured by an 8% decline in crude prices ($37.05/bbl, -3.17) amid growth/demand concerns.

Prior to Friday, the market had already established the week's gains, largely on technically-oriented trading activity in oversold stocks. Early in the week, cyclical stocks benefited from M&A activity, better-than-expected economic data (although less consequential reports), analyst upgrades, and stimulus optimism.

The mega-caps also participated in the rebound, with the market shaking off any residential weakness that followed the first presidential debate on Tuesday. Friday, however, is when the real news flowed in and the mega-caps sold off to end the week.

Briefly, President Trump tested positive for COVID-19, September nonfarm payrolls increased by 661,000 (Briefing.com consensus 800,000), and there were indications that a fiscal relief bill could soon be reached. The latter remains a show-me story, but value/cyclical stocks did benefit from the hopeful-sounding reports.

Highlighting other key economic reports, weekly jobless claims remained elevated at 837,000 (Briefing.com consensus 850,000), personal income declined 2.7% m/m in August (Briefing.com consensus -2.0%), and the ISM Manufacturing Index for September decelerated to 55.4% (Briefing.com consensus 56.0%) from 56.0% in August.

U.S. Treasuries finished lower on the longer-end of the curve. The 2-yr yield was flat at 0.13%, and the 10-yr yield increased four basis points to 0.70%. The U.S. Dollar Index fell 0.9% to 93.84.

Market Recap - S&P 500 Extends Losing Streak to Four Weeks, butNasdaq Ends Higher

This Week Was A Classic Roller Coaster Ride For The Market That Ultimately Left The S&P 500 Down 0.6% -- Its Fourth Straight Weekly Decline. The Dow Jones Industrial Average Declined 1.8%, And The Russell 2000 Declined 4.0%. The Nasdaq Composite, However, Gained 1.1%.

There wasn't one thing market participants could point to and say this is why the broad market struggled. Instead, it was another week filled with events that fed into the general uncertainty and the negative momentum seen this month.

Growth concerns were evident in the declines in the cyclical energy (-8.6%), materials (-4.6%), financials (-4.2%), and industrials (-2.6%) sectors. The information technology (+2.1%), consumer discretionary (+1.2%), and utilities (+1.2%) sectors closed higher.

The Nasdaq turned positive at the end of the week, as shares of Apple (AAPL), Amazon (AMZN), and Microsoft (MSFT) rebounded nicely on no news. These stocks rose between 3.5% and 5% this week.

In Washington, the passing of Supreme Court Justice Ginsburg, as viewed through the lens of the market, was another factor that investors initially thought could take focus away from a fiscal relief bill before the election. Democrats are reportedly preparing a $2.4 trillion relief bill, but it's unlikely to have the support of Republicans.

On the coronavirus front, Johnson & Johnson (JNJ) advanced its COVID-19 vaccine candidate to Phase 3 trials, while several countries in Europe reinstated business restrictions to help curb a resurgence of the virus. On China, Beijing updated its trade blacklist without naming any affected companies.

U.S. Treasuries finished mostly higher, particularly on the longer-end of the curve. The 10-yr yield declined three basis points to 0.66%. Gold futures fell 4.9% to $1866.30/ozt. The U.S. Dollar Index gained 1.8% to 94.59.