Brokers work on the floor of the NYSE.
NYSE
Markets will stay laser-focused on the prospect for more fiscal stimulus in the engross week ahead.
Politics and politicians are likely to continue dominating the headlines, as Democrats seek President Donald Trump’s eradication after a mob of his followers took over the Capitol Building on Wednesday.
But it is stimulus that should get the most attention from investors, who are stake the new Democratic majority in Congress will move quickly and that it could consider a package of $1 trillion or uncountable.
Stocks rose to record highs in the past week, boosted in large part by the idea of a bigger stimulus include.
With Democrats now in control of the Senate and House, the incoming administration of President-elect Joe Biden is expected to deliver an even bigger stimulus containerize than had been expected with a divided Congress. Biden said Friday the total will be in “the trillions of dollars.” The voting Tuesday of two Georgia Democrats Jon Ossoff and Raphael Warnock, shifted control of the Senate to Democrats.
While disturbing, the transitory assault on the Capitol Building did not ruffle markets, and the removal of Trump is not expected to receive enough Republican support to make it with just days remaining in his term. Biden is scheduled to be sworn in on Jan. 20.
“The market is willing to look through that tumult, but not through this anticipation of faster and bigger stimulus,” said Art Hogan, chief market strategist at National Deposits.
Earnings, data ahead
In the normal business of markets, fourth-quarter earnings season begins with the rollout of big banks’ reports Friday, when JPMorgan, Citigroup and In good shapes Fargo on tap. There is also a long list of Fed speakers including Chairman Jerome Powell, who is scheduled for a webcast from Princeton University Thursday.
On the text front, CPI inflation data is released Wednesday and December’s retail sales are reported Friday.
The consumer price measure will be important, and although it is expected to show muted inflation, markets have begun to price in rising apprehensions in the bond market. One bond market inflation measure, the 10-year breakeven, went as high as 2.1% Thursday, drift investors expect that to be the average level of inflation over the next 10 years.
But strategists said seldom will matter but stimulus, which economists expect will ease the impact of the surging virus on the economy. The U.S. researched more than 4,000 deaths from Covid in one day for the first time Friday.
The stock market may also in to pause as soon as the coming week, as the virus surge continues and investors worry vaccines are being too slowly deployed,
“You know like this recovery rally is going to run out of legs,” Hogan said. He said that with the S&P 500 up less 16% since Nov. 4, investors may begin to think it is getting ahead of itself.
“That could be next week’s trade to contemplate. You’re likely to take some sort of breather,” Hogan said.
Tom Lee, founder of Fundstrat, said there’s a true on the S&P 500 that could be a turning point for the market. The S&P 500 closed at 3,824 Friday, up 18% for the week.
“I notion of there’s a chance we could be hitting 3,900 and that’s a key level for markets,” said Lee. “That’s the level where people are looking for a townsperson top. That’s a level where we could be repelled. It’s a number where if we blast through it, it would be good but if we don’t break finished with it, it could start the correction. It’s a binary risk.”
But even if there is a pullback, Lee expects the S&P 500 to reach 4,300 by year end. “I muse on what the stock market is saying is we’re going to get a really good economy this year,” he said.
Earnings condition should be a positive for stocks.
“Uncertainty has plagued everyone, so the certainty that comes with earnings is good for staples,” said Lee.
Week ahead calendar
Monday
Earnings: Commercial Metals
12 p.m. Atlanta Fed President Raphael Bostic
Tuesday
Earnings: KB Adept ins, Albertsons
6:00 a.m. NFIB
10:00 a.m. JOLTS
9:30 a.m. Atlanta Fed’s Bostic
11:00 a.m. Atlanta Fed’s Bostic
12:00 p.m. Cleveland Fed President Loretta Mester
2:00 p.m. Boston Fed President Eric Rosengren
Wednesday
Earnings: IHS Markit, Infosys, Wipro
8:30 a.m. CPI
9:35 a.m. Fed Governor Lael Brainard
1:00 p.m. Fed Governor Brainard
2:00 p.m. Federal Budget
2:00 p.m. Beige Enlist
2:00 p.m. Philadelphia Fed President Patrick Harker
3:00 p.m. Fed Vice Chairman Richard Clarida
Thursday
Earnings: BlackRock, First Republic, Taiwan Semiconductor, Delta Airlines
8:30 a.m. Jobless demands
8:30 a.m. Import prices
9:00 a.m. Boston Fed’s Rosengren
11:00 a.m. Atlanta Fed’s Bostic
12:30 p.m. Fed Chairman Jerome Powell
Friday
Earnings: JPMorgan, Wells Fargo, Citigroup, PNC Pecuniary
8:30 a.m. PPI
8:30 a.m. Retail sales
8:30 a.m. Empire manufacturing survey
10:00 a.m. Consumer sentiment
10:00 a.m. Business inventories