Trading volume will remain thin this week with many markets closed for holidays. Stocks rallied into Christmas as positive vaccine news and a Brexit deal helped underpin a bullish outlook into 2021. And President Trump signed the long awaited relief package to further support investor sentiment.
The S&P 500 rallied 0.35% to close at 3703 on Thursday, while the Dow and NASDAQ were up just over 0.2%. Futures are up about 0.45% to 0.65% in overseas action. We believe that we are seeing a price consolidation with equities with the potential to jump up after the signing the of the second stimulus deal.
The S&P 500 chart above shows a clear bullish trend that is in consolidation phase. As long as it does not break support (which we think is unlikely), it should climb to new highs. The primary bear drivers were the bad data reports last week. (see inter week’s reports) which could signal a cooling of the equities market. We will continue monitoring and alert our readers if the S&P 500 breaks key support levels.
Key Drivers for the Week of Dec 28
TIP – This is a 1 minute brief bullet-point summary as a tool that gives them a fast and simple list of what to watch for and talking points.
- Santa Claus rally sees equities rally into Christmas
- Holidays will quiet global markets into New Years
- Outlook brightens into 2021 with vaccines, Brexit deal
- Brexit compromise secures tariff-free trade on most goods
- U.S. calendar has Dallas, Chicago PMIs, jobless claims, trade report
- Treasury auctions record $176 bln in 2-, 5-, 7-year notes
- Japan production; China manufacturing PMI; Korea consumer sentiment
European markets have climbed after some “sell the fact” trades after the Brexit deal. The German DAX is 1.4% higher, making up for the Thursday, Friday closures last week. UK markets are closed today to observe Boxing Day holidays. Treasury yields are higher on the stimulus deal and ahead of a record auctions this week. The wi 2-year is flat at 0.125%, with the wi 5-year 1 bp higher at 0.390%. The 10- and 30-year yields are over 2 bps cheaper at 0.951% and 1.688%, respectively.
Today’s data calendar has the Dallas Fed’s manufacturing index. We’re projecting an unchanged 12.0 print for December after falling 7.8 points to 12.0 in November. This would be a 5th month above zero. The Treasury auctions a record $176 bln in shorter coupons this week, starting with today’s $58 bln in 2-year notes and $59 bln in 5-year paper.