Wall Street has turned more consolidative after the hefty rally through the holidays and into the new year amid expectations for massive stimulus under the new Biden administration and vaccines.
Specifically, Biden is expected to unveil a new $2 trillion stimulus program later today. This bill is far bigger than the most optimistic people had projected and the markets are loving it.
Bob Doll, chief equity strategist at Nuveen“This will be a great year for the economy and earnings, but just a good year for the stock market. In other words, I think multiples are held back a bit because of modestly rising interest rates and inflation.”
From an investor perspective, this means we should continue to see a bullish trend for equities until Biden’s tax proposals hit. Market analysts have projected a -7% decrease in earnings if Biden’s tax proposals are passed. It is still too early to know how likely Congress will pass it as a whole, but my best guess is that they will only pass part of it.
Treasuries have continued to rally with longer-dated yields falling from their highs from almost a year ago. The tame core CPI, strong demand at the 10- and 30-year auctions, and comments from several FOMC members that QE tapering is still far off in the future all supported the rally. The 30 bond finished at 1.825% and the 10-year at 1.090%.
Today’s calendar has weekly jobless claims, with initial claims seen falling -17k to 770k from 787k. Continuing claims are expected to fall to 4.940 mln from 5.072 mln. The December import and export prices are due. With the former expected to rise 1.0%, from 0.1%, and the latter up 0.8% from up 0.6% previously. The Treasury will announce reopened 20-year bonds and 10-year TIPS. Fedspeak is heavy, featuring Chairman Powell, Rosengren, Bostic, and Kaplan.
