Market Perspective for December 22, 2020

The stock market started the week on a stagnant note in response to the news of a newly identified strain of coronavirus that has been identified in the United Kingdom. As infection rates attributed to this new coronavirus strain have been spiking in recent days, the rest of the world has been balancing this new development against the general optimism over the effectiveness and widespread availability of vaccine options. Over 20 countries have just recently imposed strict travel bans against UK residents in light of the increased infectivity rate of this new variant of the virus, which could have a chilling effect on economic activity in that region during the last stretch of the holiday season.

Despite this negative development on the pandemic front, the Dow managed to end the day on a positive note with a gain of 0.12 percent. While the Dow took a hit in the middle of the day with a loss of 400 points or 1.4 percent, it was able to turn the tide by the end of the trading session. The Russell 2000 Index mirrored the Dow’s slightly upward trajectory for Monday with an increase of 0.02 percent for the day. The Nasdaq and the S&P 500 both slightly slipped for the day with losses of 0.1 percent and 0.42 percent, respectively. Gold prices were up on Monday with an increase of 0.31 percent to $1,883.93 per ounce.

While technology did well on Monday, with SPDR Technology (XLK) rising 0.10 percent, the best performing sector was financials. SPDR Financial (XLF) climbed 1.35 percent. SPDR Real Estate (XLRE) fell 2.17 percent and SPDR Utilities (XLU) slid 1.21 percent. This indicates investors were trading based on rising interest rate expectations.

The 10-year Treasury yield was affected by the concerning pandemic-related news from the UK. On Monday, the 10-year Treasury yield fell to 0.905 percent, which was a loss of almost five basis points. In addition, the 30-year Treasury bond yield fell 1.646 percent, a loss of six basis points.

U.S. lawmakers announced Monday that an agreement has been reached on a coronavirus stimulus package to the tune of $900 billion. One of the highlights of the second round of stimulus relief is the direct payment of up to $600 per American, which is expected to be deposited directly into taxpayers’ bank accounts in the coming weeks. In addition, the $300 federal enhancement of unemployment benefits has been renewed in this most recent stimulus package.

The public rollout of the initial coronavirus vaccine distribution for the Moderna (MRNA) vaccine began Sunday for the first round of healthcare workers and first responders. This initial vaccine delivery consists of about 6 million doses and follows the distribution of the initial rounds by Pfizer (PFE) and BioNTech (BNTX).

One of the most anticipated performers for the market opening this week was Tesla (TSLA). By Monday’s close, Tesla shares were down .06 percent. This minor drop in share prices is attributed to the recent announcement by Apple (AAPL) that it will begin to implement its plans to manufacture electric vehicles as a competitor to Tesla. Conversely, Apple shares ended the day on a positive note with a gain of 1.24 percent.

Travel-related stocks, particularly cruise lines and airlines, took a hit on Monday on the heels of the recently renewed UK lockdowns. Norwegian Cruise Line (NCLH) dropped 1.59 percent for the day, Royal Caribbean (RCL) slipped 0.7 percent, United Airlines (UAL) fell 1.5 percent, and American Airlines lost 2.5 percent, which was a recovery from its earlier Monday losses of 5 percent.

The Bureau of Economic Analysis will announce its revised third quarter GDP estimate this week. Economists predict no change in the 33.1 percent growth rate.

The Conference Board will release its December consumer confidence index today. Analysts expect a small increase. The University of Michigan consumer sentiment survey is out on Wednesday. Analysts see a small drop in that survey.

Existing home sales for November will be out today. New home sales data will be released Thursday. Economists estimate an annualized sales pace of 6.69 million for the former and 1.004 million for the latter.

Wednesday will see the release of the most recent unemployment claims and personal income data.

 

On Thursday, many bond markets around the world will close early before the Christmas holiday. Markets are shut down on Friday for the holiday as well.

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