Market Perspective for January 12, 2021

The week opened with a bit of a slip for the major stock indexes. The S&P 500 dropped 0.66 percent, the Nasdaq lost 1.25 percent, and the Dow declined 0.29 percent. Real estate and technology were the major sector underperformers for the S&P 500. The Russell 2000 Index was down slightly for the day with a loss of .03 percent.

Tech companies, specifically social media platforms, took a tumble on Monday after contentious developments over the weekend regarding several companies’ decisions to ban President Trump from their platforms. Facebook (FB) shares lost 4 percent and Twitter (TWTR) shares dipped 6.4 percent. Amazon.com (AMZN) shares lost 2.15 percent, while Apple (AAPL) shares declined 2.3 percent. Microsoft (MSFT) shares dropped 1 percent on the day.

Tesla declined on news that Faraday Future was in talks with a special purpose acquisition company (SPAC). Property Solutions Acquisition Corporation (PSAC) gained 18.81 percent on news it was in talks with electric car maker Faraday. It’s debatable how much competition Faraday will give Tesla in the electric vehicle market, but it’s entry into the stock market could draw capital away from Tesla. Tesla has gained 800 percent over the past year. It dipped 7.82 percent on Monday.  SPDR Consumer Discretionary (XLY) dipped 1.87 percent on Monday. Tesla is 18.65 percent of the fund, behind only Amazon (AMZN).

West Texas Intermediate (WTI) crude oil prices decreased to $52.10 per barrel on Monday, a loss of 0.3 percent. After fighting past intraday lows on Monday, prices per barrel on the international benchmark Brent Crude (BZ: NMX) likewise fell 0.95 percent to $ 55.46. Copper also lost 3 percent for the day at $3.56 a pound. Gold gained 0.39 percent on Monday and is up to $ 1,849.70 per ounce.

The 10-year Treasury note yield increased for the fifth day in a row to 1.13 percent, its peak since last March 2020. Although not nearly close to the point of concern, an increase in the 10-year yield can spell out inflation issues down the line. Stocks typically respond negatively to the strong possibility of this trend. The U.S. Dollar also increased 0.62 percent on Monday. Both the dollar and bond rates bumped up for the day on the expectation that the newly confirmed Democratic controlled house and senate will accelerate additional coronavirus stimulus relief spending.

The strength of the dollar was one of the factors in cryptocurrencies taking a tumble on Monday. Bitcoin experienced its largest two-day loss since last March after dropping over 21 percent between Sunday and Monday. This represented around $140 billion in losses for the market.

iShares MSCI Emerging Markets (EEM) declined 1.35 percent and iShares MSCI EAFE (EFA) 1.31 percent. Rumors that Alibaba (BABA) could be nationalized by the Chinese government weighed on emerging market funds with hefty China tech exposure. iShares China Large Cap (FXI) has less and fell 1.35 percent, Invesco Golden Dragon (PGJ) has more and dipped 2.77 percent.

December retail sales are out this week. Analysts forecast declines of 0.1 percent and 0.4 percent ex-autos. Economists predict producer and consumer prices both increased 0.4 percent last month.

President-elect Biden announced that he will outline his new stimulus funding proposals on Thursday. U.S. initial jobless claims numbers are also out that day. The week will close with the release of the latest U.S. retail sales data, industrial production levels, business inventories and consumer sentiment figures.

Earnings season kicks off this week with Charles Schwab (SCHW), Delta Air Lines (DAL) on Thursday. Friday brings the mega banks J.P. Morgan (JPM), Citigroup (C), Wells Fargo (WFC) and regional giant PNC Financial Services (PNC). The consensus forecast coming into earnings season calls for an 8.8 percent drop in S&P 500 earnings. Analysts predict financial sector earnings will fall 7.5 percent. Prior quarters have seen the banks handily beat expectations.

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