Weekly Market Update: Stocks surge as Biden stimulus plan stays on track for quick passage
US stock markets surged this week enjoying the best weekly performance in months and by Friday US indices were once again hitting new all-time highs. The air finally started come out of the Reddit stocks as several Fed officials noted the stock volatility was not a matter for monetary policy. The Democrats and President Biden pressed forward with plans to provide substantial additional fiscal relief by paving a legislative path for the stimulus plan even if Republicans ultimately prove unwilling to sign on. By Friday, Speaker Pelosi indicated she was confident the House will send a Covid relief package to the Senate within two weeks and was already alluding to an additional recovery bill and an infrastructure package in the near future.
Global PMI figures remained solid despite the extension of many pandemic lockdowns in Europe and rising post-holiday case counts in the US last month. US Fed officials emphasized they remained willing to let the economy run hot and that they were unlikely to begin discussions of tapering asset purchases anytime soon given the uncertainty around the ongoing pandemic. The BOE pushed back on the notion that now is the appropriate time to prepare for negative rates putting upward pressure on GILT yields and buoying the Pound. Friday’s January jobs report disappointed coming in short of expectations on payrolls. Though the unemployment rate receded, it came at least partially at the expense of a decline in the participation rate. WTI crude closed the week near a fresh 1-year high, inducing inflation expectations to continue creeping higher. Treasury yields backed up further pushing the 10-year TIPS breakeven rate near 2.2% for the first time since 2018. Stocks had their best week in 3 months: the S&P gained 4.7%, the DJIA was up 3.9%, and the Nasdaq surged 6%.
In corporate news this week, Google posted blowout earnings numbers as its core advertising business rebounded and cloud revenue came in line with estimates. Amazon notched its highest quarterly revenue number of all time and announced CEO Bezos would step back to the executive chairman role. Ford said it plans to double its previous commitment to electric vehicles, boosting its planned investment to $22B, while also launching a partnership with Google to accelerate its transformation and improve its connected vehicle experience. Apple reportedly neared a deal with Hyundai-Kia to build Apple autonomous EVs at a Kia plant in Georgia, likely starting in 2024. Early in the week reports came out that Exxon and Chevron CEOs had discussed a potential merger last year when oil prices sank, but the discussions were said to only have been in the preliminary stages.
SUN 1/31 XOM Reportedly Exxon & Chevron CEOs discussed potential merger in 2020; discussion said to have been in early stage - press *(CN) CHINA JAN MANUFACTURING PMI (GOVT OFFICIAL): 51.3 V 51.5E (11th month of expansion, 2nd consecutive month of slowing expansion) (HK) Macau Jan Casino Rev (MOP): 8.0B v 7.8B prior; Y/Y: -63.7% v -67.0%e
MON 2/1 *(IT) ITALY JAN MANUFACTURING PMI: 55.1 V 52.4E (7th month of expansion) *(DE) GERMANY JAN FINAL MANUFACTURING PMI: 57.1 V 57.0E *(EU) EURO ZONE DEC UNEMPLOYMENT RATE: 8.3% V 8.3%E AAPL To sell USD-denominated 5-year, 7-year, 10-year, 20-year, 30-year and 40-year bonds (6 tranches in total) *(US) JAN FINAL MARKIT MANUFACTURING PMI: 59.2 V 59.1E (series record) *(US) JAN ISM MANUFACTURING: 58.7 V 60.0E; PRICES PAID: 82.1 V 75.5E (highest prices paid since April 2011) (US) Congressional Budget Office (CBO) issues 2020-2024 economic projections: upgrades economic outlook; sees GDP reaching pre-pandemic peak by mid-2021, unemployment to fall to 5.3% by end of 2021 F Ford and Google launch six-year partnership to accelerate Ford's transformation and reinvent the connected vehicle experience (US) Fed's Kashkari (dove, non-voter): There is still slack in the economy; there is a long way to go before we get economy fully reopened (US) Treasury quarterly financing estimates: to borrow $274B in Jan-Mar quarter v $175Be (prior estimate to borrow $1.127T) *(AU) RESERVE BANK OF AUSTRALIA (RBA) LEAVES CASH RATE TARGET UNCHANGED AT 0.10%, AS EXPECTED; MAINTAINS 3-YEAR YIELD TARGET AT 0.10%; MAINTAINS A$100B BOND BUYING PROGRAM AND WILL PURCHASE ADDITIONAL A$100B IN BONDS WHEN CURRENT PROGRAM EXPIRES
TUES 2/2 *(EU) EURO ZONE Q4 ADVANCE GDP Q/Q: -0.7% V -0.9%E; Y/Y: -5.1% V -5.3% HOL Astra to Become the First Publicly Traded Space Launch Company on NASDAQ via Merger with Holicity for implied EV of $2.1B XOM Reports Q4 $0.03 v $0.01e, Rev $46.5B v $48.6Be; Records first annual loss in at least 40 years ATOS Phase 2 Endoxifen Breast Cancer Study Produces Substantially Positive Results Allowing Study to be Halted Early GOOGL Reports Q4 $22.30 v $15.91e, Rev $46.4B v $44.1Be AMZN Reports Q4 $14.09 v $7.05e, Rev $125.6B v $120.4Be; Announces CEO transition; Jeff Bezos announces transition to Exec Chairman 992.HK Reports Q3 Net $395M v $258M y/y, Rev $17.3B v $14.1B y/y (record high Net and Rev)
WEDS 2/3 SIE.DE Reports Q1 Net €1.38B v €864Me, Industrial Business EBITA €2.13B v €1.67Be, Rev €14.1B v €13.4Be; Raises FY21 comp Rev, Net guidance VOD.UK Issues Q3 Trading update: Q3 Rev €11.2B v €11.8B y/y; Return to service revenue growth and FY21 guidance reiterated *(IT) ITALY JAN PMI SERVICES: 44.7 V 39.5E (5th month of contraction) *(FR) FRANCE JAN FINAL PMI SERVICES: 47.3 V 46.5E (confirms 5th straight contraction) *(DE) GERMANY JAN FINAL PMI SERVICES: 46.7 V 46.8E (confirms 4th straight contraction) *(EU) EURO ZONE JAN FINAL PMI SERVICES: 45.4 V 45.0E (confirms 5th straight contraction) *(UK) JAN FINAL PMI SERVICES: 39.5 V 38.8E (confirms 3rd straight contraction) *(EU) EURO ZONE JAN ADVANCE CPI ESTIMATE Y/Y: 0.9% V 0.6%E; CPI CORE Y/Y:1.4% V 0.9%E (core reading a 5-year high) *(US) JAN ADP EMPLOYMENT CHANGE: +174K V +50KE; Now seeing signs of the prolonged impact of the pandemic on large companies as well *(US) JAN ISM SERVICES INDEX: 58.7 V 56.7E *(US) DOE CRUDE: -1.0M V -0.5ME; GASOLINE: +4.5M V +1ME; DISTILLATE: -0.0M V -0.5ME (US) Association of American Railroads weekly rail traffic report for week ending Jan 30th: 520.7K, +2.1% y/y EBAY Reports Q4 $0.86 v $0.83e, Rev $2.87B v $2.70Be; Raises dividend 13% to $0.18/shr
THURS 2/4 NOK Reports Q4 non- IFRS EPS €0.14 v €0.15 y/y, Rev €6.57B v €6.51Be; Does not propose dividend for 2020 ROG.CH Reports FY20 (CHF) Core EPS 19.16 v 19.36e, Core Op 21.54B v 21.7Be, Rev 58.3B v 61.5B y/y; Expects to further increase dividend NOKIA.FI Reports Q4 Net €M v €M y/y, Rev €6.57M v €M y/y DBK.DE Reports Q4 Net €51M v -€1.60B y/y, Pretax €175M v -€22.4Me, Net Rev €5.45B v €5.34B y/y RDSA.NL Reports Q4 CCS EPS $0.05 v $0.37, Adj CCS Net $393M v 2.93B, Rev $45.0B v $85.1B UNA.NL Reports FY20 Net €5.58B v €7.0Be, adj Op €8.3B v €B, Rev €50.7B v €50.9Be *(EU) EURO ZONE DEC RETAIL SALES M/M: 2.0% V 2.8%E; Y/Y: 0.6% V 1.2%E TW Reports Jan ADV $1.0T , +29.5% y/y FAST Reports Jan net sales $448.0M, -3.2% y/y *(UK) BANK OF ENGLAND (BOE) LEAVES INTEREST RATES UNCHANGED AT 0.10%; AS EXPECTED; does not intend to send signal that negative rates coming, but appropriate to get ready for negative rates if needed *(UK) BOE FEB MINUTES: VOTED 9-0 TO LEAVE INTEREST RATES UNCHANGED (UK) BOE Gov Bailey: Spare capacity seen being eliminated over 2021- post Rate Decision Press Conference *(US) Q4 PRELIMINARY UNIT LABOR COSTS: 6.8% V 4.0%E; NONFARM PRODUCTIVITY: -4.8% V -3.0%E *(US) INITIAL JOBLESS CLAIMS: 779K V 830KE; CONTINUING CLAIMS: 4.592M V 4.70ME F Raises Planned Investment in EV, AV Leadership to $29B; Further Advances Turnaround of Global Automotive Business in Q4
FRI 2/5 SAN.FR Reports Q4 Business EPS €1.22 v €1.22 y/y, Business Net €1.53B v €1.53B, Rev €9.38B v €9.38Be *(US) JAN AVERAGE HOURLY EARNINGS M/M: 0.2% V 0.3%E; Y/Y: 5.4% V 5.0%E; AVERAGE WEEKLY HOURS: 35.0 V 34.7E *(US) JAN CHANGE IN NONFARM PAYROLLS: +49K V +105KE; Manufacturing Payrolls back to negative AMZN Reportedly plans to train hundreds of people to launch their own trucking businesses exclusively to transport Amazon packages amid shortage of trucking companies to handle sufficient amount of freight - The Information (US) DEC CONSUMER CREDIT: $9.73B V $12.0BE