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More stimulus is on the way - What does it mean for the market?

by Fortem Financial January 20, 2021

Stocks closed lower on Friday as President Elect Biden released plans for a $1.9 trillion dollar COVID-19 relief package. On Friday, tech shares gained while banks led the decline of financial stocks after some of the largest players released less than stellar earnings reports. This short-term selloff goes against the long upward trend for stocks. The S&P 500 hit a record high during the first week of the year, only to fade slightly last week. Energy stocks led the market last week as oil prices reached levels not seen since February 2020. Investors will look for guidance from the new administration and Congress as the shifting political landscape has businesses changing strategies while the economy has yet to pick back up from last year. While retail sales fell in December, production increased more than expected. The increase marked eight straight months of gains and could be a bright spot for a battered economic recovery. In a shift from mega retailers, e-commerce retailer Etsy was the top performing stock in the S&P 500 last week. The company was touted by analysts after strong data pointing to increased sales has investors looking to the company’s earnings release next month. General Motors was also a top performer last week after the company announced a new electric Corvette SUV to compete with Ford. Looking ahead this week, the world will be focused on Wednesday’s inauguration and the following days as the new administration begins its first 100 days with ambitious plans to fight the virus and support the economy.

The announced $1.9 trillion stimulus package seemed to be less than what was being anticipated by markets as equities were weak, gold little changed, and bond yields only making small gains. For the week, oil prices continued to rise on the back of the January 5th surprise OPEC cut and the generally weak dollar. Mid-week news included Wednesday’s Consumer Price Index data which registered a 0.4% increase for December as energy prices rose 4.0%. Last Friday was littered with economic reports. Industrial Production was found increasing for December and easily beat consensus expectations of 0.5% with a 1.6% gain. This was the third consecutive month of rising industrial production and utilities led the way with a 6.3% increase as December temperatures fell increasing heating demand. Producer Prices (the PPI) rose 0.3% on the back of a 5.5% increase in energy prices. Goods and services also had small increases. Producer prices excluding food and energy were up 1.2% this past year. The Friday Retail Sales report disappointed with a 0.7% December decline. The decline is attributed to the decline in stimulus as the latest round of stimulus checks were not sent until the end of the month.
Source: First Trust


Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments. Data provided by FactSet.

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