Thursday, January 7, 2021
Top Story
LPL Research Condemns Violence in Washington, DC
LPL Research condemns the violent actions at the US Capitol Building on Wednesday and hopes for healing in our nation’s political and societal divides. We fully support a peaceful and orderly transition of power on January 20.
Daily Insights
Stocks open higher
- US stocks opened higher after Congress officially certified President-elect Joe Biden’s Electoral College win.
- The S&P 500 Index opened higher, while the Nasdaq 100 led early gains after Wednesday’s underperformance.
- European markets are mixed in midday trading, with the United Kingdom the laggard.
- Asian stocks closed mostly higher, with Hong Kong the lone decliner.
Jobless claims lower than expected. The United States reported 787,000 weekly claims for unemployment insurance through January 2, 2021, below FactSet consensus estimates of 801,000 (source: US Department of Labor). Continuing claims also beat estimates, with 5.1 million Americans still on unemployment insurance versus estimates for 5.2 million. The ongoing threat of COVID-19 has increased the fragility of the job recovery in the very short term, though additional stimulus strengthens the bridge to the end of the pandemic.
US dollar likely to be weak under Biden administration. The Senate election results in Georgia may strengthen the case for a weak US dollar.
- A Democratic sweep of Congress potentially paves the way for more deficit spending to combat COVID-19 and implement some of Biden’s priorities, such as infrastructure and green energy.
- The possibility of easing trade tensions could put incremental pressure on the US dollar.
- Higher taxes—if they come—would be dollar negative.
- A weaker US dollar could increase the attractiveness of international equities and US-based multinationals.
Winners and losers of 2020
We look at some of the asset class and sector winners and losers of 2020 today on the LPL Research blog.
What Democratic sweep means. As a result of Tuesday’s Georgia Senate elections, Democrats now have control of both chambers of Congress. Historically stocks have done just fine under this scenario. In fact, the S&P 500 Index gained 6 of the past 7 times this occurred, with the only loss a slight loss in 1994.
Technical update
Stocks are set to build on Wednesday’s gains, but the S&P 500 will still need a 0.9% gain to eclipse the intraday highs from Tuesday. Financials benefited from the 10-year Treasury yield breaking out above 1% and was the top performing sector, up 4.4%. The Russell 2000 Index set a new record high after pausing over the past two weeks.
COVID-19 news. The US reported 217,000 new COVID-19 cases Wednesday, a 7.8% week-over-week increase, while the 7-day average week-over-week increase climbed to its highest level since early December (source: COVID Tracking Project).
- New hospitalizations rose the most since October.
- Japan declares second state of emergency amid rising cases.
Research Communications
2020 in 20 Charts
2020 was a historic year in many ways, which made it hard to highlight just a few charts. So in honor of 2020, we picked 20 charts that show how amazing–and devastating—2020 really was. Chief Market Strategist Ryan Detrick reviews 2020 in 20 charts in this YouTube video.
10 Lessons LPL Research Learned in 2020
LPL Research reviews its top 10 takeaways from 2020, including the 2020 year-end rally and what the markets are saying about the Georgia runoffs. Listen to this week’s Market Signals podcast, also available on the LPL Research YouTube channel.
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