The Wall Street bull is seen in the snowstorm on January 31, 2021 in New York City.
Eduardo MunozAlvarez | BUSY printing | Corbis News | Getty Images
A decline in new Covid infections, coupled with improved economic data and stimulus hope, could boost the stocks thriving in the emerging economy next week.
Over the past week, expectations for a strong economic rebound have helped raise interest rates.
While the broader stock market was turbulent, sectors doing well in an upswing – finance, airlines and industry – stood out as leaders. This is known as the reflection trade.
These stocks declined by 2% at the expense of growth and technology. Strategists expect the trade in reflection to continue, as signs suggest the economy may return sharply.
The S&P 500 fell 0.7% to 3,906 during the week, while the Dow rose 0.1% to 31,494. The Nasdaq was down 1.57% for the week, to 13,874, with the decline in technology. Apple, for example, gave up 4% this week.
The big event in the coming week is testimony from Federal Reserve Chairman Jerome Powell, who will give his semi-annual testimony on economics on Tuesday before the Senate Banking Committee and the House Financial Services Committee on Wednesday.
He is expected to discuss the rise in interest rates, as well as concerns that inflation may start to rise.
“He will have to admit that the data is improving and that the virus situation is improving a lot,” said Mark Cabana, head of the US interest rate strategy at Bank of America. “It’s going to be hard for him to sound as thousand as he was.”
But Powell is expected to continue to stress that the Fed will keep rates low for a long time and maintain its easy policy to help the economy.
Improving forecasts
Economists last week achieved track forecasts for the first quarter’s gross domestic product, fueled in part by an unexpectedly sharp rise of 5.3% in January.
Goldman increased growth in the first quarter to 6%, and Morgan Stanley said it achieved 7.5% for the first quarter. Economists linked the surprise increase in retail sales to stimulus checks sent to individuals in the last $ 900 billion stimulus program approved by Congress in late December.
The Biden government has proposed another $ 1.9 trillion in aid packages. It could come before the House of Representatives next week.
“[Powell’s] going to stick to the writing. The text is that legislators should continue to support the economy. He will support the government’s efforts to get a big package through, ‘said Mark Zandi, chief economist at Moody’s Analytics.
Important information during the week
Earnings remain important. There are more than 60 companies signing up, including Home Depot, Macy’s and TJX.
Major economic reports falling next week include durable goods on Thursday, along with personal income and expenses on Friday
The Friday report contains the index of personal consumption spending, which the Fed monitors. The market is on the lookout for signs of rising inflation.
“I think the boom is going to start faster than most people think,” said Ed Keon, chief investment strategist at QMA.
He said the stronger economy was helping to boost Treasury yields, with the 10-year high peaking at 1.36% on Friday. Keon said rolling out vaccines is helping the outlook, as well as slowing down the virus.
“I think people were expecting a boom in the second half, but I think the second quarter is going to be very strong as people change their behavior,” he said.
“The warning when it comes to savings and not going out goes away sooner than we think,” Keon said. “At the moment, you may see a GDP figure of 10% in the second or third quarter. This is also due to the fact that we are likely to get a large stimulus package.”
He said investors were underestimating the increase in economic activity that should start in March and will pick up steam in the second and third quarters as more people go out to eat and other activities again.
“I think the world is going to look very different from the last twelve months. We are still strong. We are still overweight,” Keon said.
He said a flood could hit the economy.
“The U.S. economy was about $ 21 billion last year,” Keon added. “Households now have an extra saving of about $ 1.5 billion and the stimulus package is likely to be in the region of $ 1.2, $ 1.6 billion.”
He said the services sector should start to see an advantage that benefits the side of the economy. “You’re going to see an incredible boom.”
Week calendar in advance
Monday
Earnings: Dish Network, Royal Caribbean, Marathon Oil, Ingersoll-Rand, Occidental Petroleum, Transocean, Zoominfo, ONEOK, HSBC
10:00 leading economic indicators
Tuesday
Earnings: Home Depot, Macy’s, Intuit, Thomson Reuters, Square, Toll Brothers, Jazz Pharmaceuticals, McAfee, Medtronic, Pioneer Natural Resources, Bank of Montreal
09:00 FHFA house prices
09:00 S & P / Case-Shiller house prices
10:00 a.m. Fed Chairman Jerome Powell semi-annual economic testimony
Wednesday
Earnings: Lowe’s, NVIDIA, Viacom, Public Storage, Booking Holdings, TJX, Brookdale, Royal Bank of Canada, Apache, Petrobras, Pure Storage, L Brands, Casper Sleep
07:00 Mortgage Applications
10:00 New home sales
10:00 a.m. Fed Chairman Powell Semi-Annual Economic Testimony at House Financial Services Committee
Thursday
Earnings: Salesforce.com, Norwegian Cruise Lines, Etsy, Best Buy, HP, Shake Shack, Beyond Meat, Anheuser-Busch Inbev, Dell Technologies, Virgin Galactic, American Tower, Cleveland Cliffs, Airbnb, Carvana, Door Dash
08:30, President of the Atlanta Fed, Raphael Bostic
8:30 a.m. Unemployed claims
08:30 Durable goods
8:30 Q4 GDP second reading
10:00 Pending home sales
10:00 Advanced economic indicators
10:00 the President of St. Louis, James Bullard
15:00 New York Fed President John Williams
Friday
Earnings: Fluorine, Cinemark, Draft Kings, Foot Locker, AMC Networks
08:30 Personal income and expenditure
08:30 Advanced Trading
09:45 Chicago PMI
10:00 Consumer sentiment
Saturday
Earnings: Berkshire Hathaway