We do believe that the S&P 500 (INDEXSP: .INX) is signally an end to its bullish trend (see chart above) despite the bulls remaining optimistic over stimulus, vaccines, earnings. Bears appear to be gaining an edge who are pointing to the second virus wave/lockdowns, worries over a small fiscal package, and delays to the vaccine rollout. The latter weighed on Wall Street on Friday after the major indexes had posted record highs earlier in the week. Treasury yields dipped to end the week on the erosion in stocks, regaining some lost ground. The 30- and the 10-year rate fell 2 bps to 1.847% and 1.086%, respectively, with the wi 2-year little changed at 0.130%.
I think 2021 will be a crazy year for investors because markets are likely to continue the uncertainty. Just this week:
- Monday: JPMorgan tells clients, “We are receiving numerous questions [about] whether a bubble is potentially forming in financial markets.”
- Tuesday: A massive group of individual traders from Reddit dominated the financial news with the promotion of GameStop stock that is now crushing hedge funds for billions.
- Wednesday: The S&P 500 turns red and starts to show signs of a bear while the Dow drops to a new record percentage since October.
- Thursday: The equities markets rally back as Robinhood and many other brokers halt trading in GME and other stocks. The blowback unites the left and right against the brokerages.
- Friday: Trading resumes on a limited basis at the brokerages for GME and the S&P 500 had its worst week since last October.
It will be a busy week of data, earnings, and supply, though today’s calendar is light. The only economic reports are the Dallas Fed manufacturing index and the Chicago Fed national activity index. The Treasury auctions $60 bln of 2-year notes to kick off a record $183 bln in short-dated coupon offerings.
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Today’s larger-cap reports come from Kimberly-Clark, Otis, Brown & Brown, and Graco. The FOMC meets this week (Tuesday, Wednesday) though no policy changes or shifts in the guidance are expected. Earnings later in the week include Apple, Facebook, Tesla, Microsoft, J&J, Starbucks, and Boeing. Data later in the week includes preliminary Q4 GDP, durable goods, consumer confidence, new home sales, and income and consumption figures.