Weekly market recap: 10 stories to remember

Read the 10 stories to remember from the week which ended January 15, 2021.  

Story #1: Late declines leave U.S stocks mixed for week
The S&P 500 Index hit record intraday highs on Thursday before pulling back sharply on Friday, hence finishing the week mixed. The tense political situation in the U.S seemed to remain a major driver of sentiment during the week. Investors kept a close eye on efforts to quickly remove Trump from the White House, including Democrats’ call to invoke the 25th Amendment and the House of Representatives’ unprecedented second impeachment of the president on Wednesday. Safety concerns surrounding the upcoming inauguration of President-elect Joe Biden on January 20 and the resulting deployment of thousands of National Guard troops to Washington also dominated headlines.

Story #2: Friday pullback led by disappointing Retail Sales and worrying U.S jobs number
A major trigger for Friday’s pullback may have been the 0.7% drop in U.S retail sales in December, which was more than expected. The broad-based drop was not apparently due to COVID-19 restrictions, with the decline concentrated in online sales. Weekly jobless claims, reported Thursday, hit 965,000, the highest level since mid-August. Colder December weather and a snapback in utility demand drove part of the gains, however.

Story #3: Energy stocks, value and small caps outperformed
Energy stocks led gains within the S&P 500 over the week, helped by a surprisingly large drawdown in domestic oil inventories. Communication services shares underperformed after social media companies Twitter and Facebook announced bans of President Trump and others on their platforms. Small-caps outpaced large-caps, and value shares outperformed growth stocks. The USD 1.9 trillion stimulus package suggested by Joe Biden provided some support to the “rotation” trade this week.

Story #4: The start of the unofficial earnings season
Banking giants JPMorgan Chase, Citigroup, and Wells Fargo reporting fourth-quarter results before the start of trading on Friday. Despite upside earnings surprises, shares in all three fell as trading began, with Wells Fargo leading the declines on a revenue miss. Analysts polled by FactSet expect overall earnings for the S&P 500 to have declined 6.8% (on a year-over-year basis) in the final quarter, the fourth-worst showing over the past decade. For 2020 as a whole, analysts were anticipating that earnings fell 13%.

Story #5: Fed Chairman Jay Powell sees no rate hikes until inflation stays above 2%
The retail sales data seemed to push Treasury yields lower on Friday, but long-term yields increased modestly through most of the week, supported by stimulus plans and dovish comments from Federal Reserve Chair Jerome Powell who affirmed that the central bank has no plans to raise interest rates anytime soon. They would first need to see inflation remain above 2% for some time.

Story #6: European stocks fell as the resurgence in coronavirus infections dented optimism
The pan-European STOXX Europe 600 Index ended the week 0.81% lower, while Germany’s Xetra DAX Index declined 1.86%. The UK’s FTSE 100 Index slid 2.00%, pulled down by data showing that the economy shrank in November due to the imposition of a stricter lockdown. Indeed, European governments continued to toughen and extend lockdowns amid the emergence of new, highly infectious variants of the coronavirus and increasing hospitalizations of patients with COVID-19, the disease that the virus causes.

Story #7: Renzi’s Italia Viva quits Italian government
Italy’s coalition government lost its parliamentary majority when three ministers from former Premier Matteo Renzi’s Italia Viva party resigned. Political analysts said that if Conte cannot form a new majority coalition, a general election would ensue, barely five months after the government took office. Core eurozone government bond yields largely fell on the back of the rise of political uncertainty while instability in Italy pushed peripheral eurozone bond yields higher.

Story #8: Chinese stocks fell as the U.S. added another nine Chinese companies to its blacklist
For the week, the country’s large-cap CSI 300 Index declined 1.4% and the Shanghai Stock Exchange Composite Index shed 0.6%. Shares of Chinese internet leaders Alibaba and Tencent were volatile on reports that they too would be added to the U.S. blacklist, though this had yet to happen by Friday. Shares of Xiaomi fell sharply on its unexpected addition to the list. Banks, however, rose following strong fourth-quarter earnings.

Story #9: China's exports surge
China’s December exports climbed a better-than-expected 18.1% year-on-year in U.S. dollar terms. For all of 2020, exports grew 3.6% year over year to a record USD 2.6 trillion, while imports declined 1.1%. The latest trade data showed that China continues to record the strongest export growth in Asia and underscored the country’s economic strength as most major economies are struggling to control the pandemic.

Story #10: A tough week for “anti-fragile“ assets
Gold tumbled back below $1850 over the week. Meanwhile, cryptocurrencies had a tough week after an exceptionally strong start of the year. Bitcoin was down more than 20% from the all-time high reached the previous week. It is now back above $36,000.


Source: www.zerohedge.com, T Rowe Price.  Image: www.dailyhodl.com 

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