Monday, January 4, 2021
Markets start the New Year higher. US markets continue their trek higher following last year’s nine-month rally. Market participants appear optimistic for a better 2021 in the wake of COVID-19 vaccine progress and December’s stimulus measures.
- US stocks appear comfortable with the uncertainty ahead of Wednesday’s Georgia Senate runoffs.
- European markets are higher during midday trading, with the Euro Stoxx 50 up more than 1%.
- Asian markets finished mostly higher.
2020 Sector Wrap Up
The S&P 500 Index closed 2020 with a 16.3% gain, led by its largest sector—technology. Tech gained 42% for the year, a full 10% better than consumer discretionary, the second best performer. However, not all sectors were able to rebound from losses early in the year, with utilities, real estate, financials, and energy finishing the year lower. The energy sector’s 37% decline led all sectors to the downside and eclipsed 2008 for the worst year in the history of the S&P 500 Energy Sector.
Technicals Review of 2020. The Dow Jones Industrial Average and S&P 500 closed out 2020 at record highs, while Nasdaq and the Russell 2000 Index closed below their respective highs. All major domestic indexes come into 2020 amid strong uptrends and with historic participation. The Santa Claus Rally includes the first two trading days of the New Year, as stocks are climbing in early trading.
Week ahead. The New Year kicks off with some timely and high-profile economic data:
- Monday: Markit manufacturing Purchasing Managers’ Index (PMI) for Dec., construction spending (Nov.)
- Tuesday: Institute for Supply Management (ISM) Manufacturing (Dec.)
- Wednesday: Auto sales (Dec.), ADP employment (Dec.), durable and factory orders (Nov.)
- Thursday: ISM Non-Manufacturing, weekly jobless claims, trade balance (Nov.)
- Friday: Nonfarm payrolls and unemployment report (Dec.), wholesale inventories (Nov.), and consumer credit (Nov.)
COVID-19 news. New daily cases remained slightly over 200,000 over the holidays while hospitalizations reached a new pandemic high (source: COVID Tracking Project). Though a post-holiday bump is expected, restrictions may not be tightened in any meaningful way while the vaccine rollout is expected to accelerate.
- US government officials have suggested using two half-doses of Moderna’s vaccine to speed up distribution.
- Israel has already vaccinated more than 12% of its population and could potentially reach herd immunity within the next month.
LPL Research in the Media
LPL Financial Chief Market Strategist Ryan Detrick joined Brian Sullivan on Power Lunch recently to discuss the strong end-of-year rally.
A Stimulus Bridge to Economic Recovery
A new stimulus package could help keep the economic recovery moving forward as we wait for COVID-19 vaccines to become available. LPL Research strategists discuss the economic outlook, the Fed, and more in this week’s Market Signals podcast, also available on the LPL Research YouTube channel.
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