Wall Street extended Monday’s gains sharply and Tuesday saw one of the best sessions in several months. The major indexes climbed back toward recent highs, unperturbed by the threat of six more weeks of winter as Punxsutawney Phil saw his shadow. But, gains faded slightly into the close.
Investor optimism was boosted by hopes for more stimulus as President Biden and Senate Democrats look to pass the $1.9 tln relief bill via “reconciliation” (51 votes) and bypassing the Republicans. Anxiety over the recent Reddit retail frenzy also subsided, while better news on vaccines, decent earnings, and data also helped.
The rally in risk weighed on Treasuries, but not much, as selling was restrained by the Fed’s ongoing commitment to low rates, and by technicals as key levels held.
Key Market Movers:
- U.S. data calendar includes Jan ADP employment survey, Jan services ISM
- Canada data calendar empty – employment and trade out on Friday
- Dollar holding firm as Democrats look to pass $1.9 stimulus without Republicans
- Core EGB yields lifted with Treasuries as stocks continue to rise
- Italian bond as well as stock markets rally as Draghi is touted for PM
- Eurozone Jan HICP inflation higher than expected at 0.9%, core at 1.4%
- Eurozone Jan services PMI revised up to 45.4 from 45.0, composite to 47.8
- Global stock rally continued in Asia with sovereign yields nudging higher
- China Caixin services PMI dropped to 52.0 in January from 56.3
- Japan Jan Services PMI fell to 46.1 from 47.7 in December
The second busiest earnings week of the season is in full swing and today’s reports include PayPal, AbbVie, QUALCOMM, GlaxoSmithKline, Spotify, Boston Scientific, Humana, MetLife, Biogen, Cognizent Tech, Allstate, Canon, Yum China, DTE Energy, IAAC/Interactive, IDEX, Avery Dennison, and Apollo Global Management.
For data, the January ADP employment survey is due, with private payrolls expected to rebound 90k, versus the -123k outcome in December. The January services ISM is penciled in dipping to 57.0 from 57.7. Weekly MBA mortgage and oil inventory figures are also due.
The Treasury announces its February refunding and includes 3- and 10-year notes, and 30-year bonds. Debt officials will also outline the supply calendar for the next several months. We expect coupon volumes to be left unchanged at current levels. For Fedspeak, Kashkari, Bullard, Harker, Evans, and Mester are all on deck.
