Company / Analytics

Week 6 in Brief

U.S stocks closed at record highs on Friday, driven by the prospect of fiscal stimulus from Washington that is expected to boost economic recovery, falling coronavirus cases, positive news on vaccine distribution efforts & impressive quarterly corporate earnings reports.

How did the major indices perform?

• The major indexes have risen for two consecutive weeks, led by the energy sector which has seen crude oil prices at 12-month highs, and the financials sector which has seen a rise in long-term U.S. bond yields.
• On Friday, the Dow Jones Industrial Average rose 27.70 points, or 0.1%, to 31,458.40, closing at a record; the S&P 500 climbed 18.45 points, or 0.5%, to 3,934.83, marking its second straight all-time high finish; while the Nasdaq Composite gained 69.70 points, or 0.5%, to 14,095.47, booking another record close.
• For the week, the Dow rose 1%, the S&P 500 gained 1.2%, and the Nasdaq picked up 1.7%.

What drove the market?

• Coronavirus stimulus: Stocks rose due to optimism about another large fiscal stimulus package from Congress closer to the Biden administration’s $1.9 trillion proposal. A House committee on Thursday approved half of Biden’s relief plan, advancing $1,400 payments to millions of Americans alongside other measures opposed by Republican lawmakers. Treasury Secretary Janet Yellen called for further financial support in a virtual meeting with G7 finance ministers and central bank governors.
• Vaccine News: Investors are keeping an eye on virus control and vaccine distribution efforts, and equities were buoyed by the news this week that the U.S. is on pace to exceed Biden’s goal of administering 100 million vaccine doses in his first 100 days in office, with more than 26 million shots delivered in the past three weeks. President Biden announced on Thursday that the U.S. will have enough COVID-19 vaccine by the end of the summer to inoculate 300 million Americans. Roughly 34.7 million out of some 331 million Americans have received at least their first dose of vaccine, according to the CDC.
• Economic data: Equities reacted little to the University of Michigan’s consumer sentiment index, which unexpectedly fell to a six-month low, reflecting pessimism about financial security, especially among lower-income Americans.
• Corporate Earnings: Investors were upbeat on continuous positive corporate earnings, which have seen earnings per share (EPS) surpass prior-year levels. But while stock-market valuations have been on the higher end of historical levels, analysts at Credit Suisse noted three factors that could trigger a market sell-off on the otherwise strong bull market, including, disappointing growth in Europe, risks of overheating or Fed tapering, and margin squeeze on earnings.
• Meanwhile, trading was limited through Friday as much of Asia was closed due to holidays, while the U.S. was prepping for a three-day weekend. U.S. markets will be closed Monday for Presidents Day.

Which stocks were in focus Friday?

• Shares of Walt Disney fell 1.8% despite the company delivering a surprise Q4 profit, which saw a surge in Disney+ subscriptions lead a rebound from the quarter.
• Shares of oil giant Chevron Corp. gained 0.6% despite S&P Global Ratings announcing it downgraded Chevron Corp bonds to AA-, from AA, with a stable outlook.
• Shares of Cloudflare Inc. slid 5.8% after the cybersecurity company’s results and outlook topped Wall Street expectations on Thursday. The shares have surged nearly 400% over the last 12 months. Shares closed at $85.95.
• Expedia Group Inc. shares closed down 2.3%, in what indicates the continued effects of the COVID-19 pandemic on the travel industry. Gross bookings and revenue each plunging 67% in the fourth quarter.

How did the European markets perform?

• European shares reversed earlier losses to close higher on Friday, led by ASML and L’Oreal, although a dip in Volkswagen weighed on Germany’s main index.
• The pan-European STOXX 600 Index ended the session up by about 0.6% provisionally, with media shares climbing 1.5% and tech up 1.3% as most sectors and major bourses finished in positive territory. For the week, the Stoxx 600 closed up 1%.
• Germany’s DAX underperformed, ending flat as carmaker Volkswagen slipped 0.7% after the company said deliveries slid in January.
• Britain’s coronavirus-ravaged economy shrank 9.9% in 2020, the biggest annual fall in output since modern records began, but it avoided heading back towards recession at the end of last year, data showed. London’s FTSE 100 index erased early losses to rise 0.9% with healthcare stocks in the lead.
• In stocks, the world’s biggest cosmetics group L’Oreal hit a three-month high after forecasting a strong rebound in makeup sales. The French company reported late on Thursday that total sales reached 7.88 billion euros ($9.5 billion) in the October to December period, flat from last year on a reported basis but up by 4.8% on a like-for-like basis, excluding currency effects and acquisitions, with the numbers beating forecasts. Shares were up 1.4% in early trading, among the strongest performers on France’s benchmark CAC-40 index.
• At the bottom of the European blue-chip index, Austrian electricity company Verbund tumbled 9% and Spanish renewable energy supplier EDP Renovaveis dropped 7.5%.

How did Asian markets perform?

• Asian markets finished mixed as of the most recent closing prices. The Shanghai Composite gained 1.43% and the Hang Seng rose 0.45%. The Nikkei 225 lost 0.14%.
• South Korean e-commerce retailer Coupang filed for an initial public offering in the U.S.

Commodities and other assets

• Oil futures edged higher, with the U.S. benchmark rose 2.1% to $59.47 a barrel, nearing the key $60 level.
• Gold futures ended 0.2% lower to settle at $1,823.30 an ounce, trimming an 0.6% weekly gain.
• The yield on the 10-year Treasury note jumped 3.1 basis points at 1.199%. Yields and bond prices move in opposite directions.

Currencies

• The dollar was slightly higher on Friday, coming off its strongest level for the day, as risk appetite returned to the market in the afternoon with U.S. equities recovering from early losses and Treasury yields extending their rise. The ICE USD Index, a measure of the currency against a basket of six major rivals, was up 0.1%.
• Analysts differ on how President Biden’s $1.9 trillion fiscal stimulus package will affect the dollar. Some see it as bolstering the currency as it should speed a U.S. recovery relative to other countries, while others reckon it would feed a global reflation narrative that should lift riskier assets at the dollar’s expense.
• The dollar was up 0.2% against the yen at 104.97 yen. It fell 0.4% on the week, its steepest fall since mid-December.
• The euro slipped 0.1% to $1.2116, but on the week, the single European currency rose 0.5%.
• The British pound rose 0.2% versus the dollar to $1.3848, despite data showing Britain’s economy suffered a record slump in 2020, although it did grow in the final quarter.

Next Week

• Markets are closed in the US on Monday for the President’s Holiday, the earnings season winds up in the US and trading app Robinhood testifies before Congress.
• Watch out for our Monday Weekly Market Outlook that provides insights on what’s coming up that week.