The bull on Wall Street is seen during the January 31, 2021 snowstorm in New York.
Eduardo MunozAlvarez | SEE press | Corbis News | Getty Images
A decline in new Covid infections, along with improved economic data and stimulating hopes, could boost stocks that are flourishing in a recovering economy next week.
Over the past week, expectations for a strong economic recovery have helped raise interest rates.
While the wider stock market has been turbulent, the sectors that are doing well in a recovery – financial, airline and industrial – have stood out as leaders. This is known as the rebate trade.
These shares gained at the expense of growth and technology, down 2%. Strategies expect the trade in inflation to continue, as signs suggest that the economy may return abruptly.
The S&P 500 was down 0.7% on the week to 3,906, while the Dow was up 0.1% at 31,494. The Nasdaq fell 1.57 percent a week to 13,874 as technology declined. Apple, for example, gave up 4% a week.
The big event next week is the testimony of Federal Reserve Chairman Jerome Powell, who is giving his half-yearly testimony on the economy to the Senate Banking Committee on Tuesday and the Financial Services Committee on Wednesday.
He expects to discuss rising interest rates, as well as concerns that inflation could start to take off.
“They will have to recognize that the data is improving and that the virus situation is improving quite materially,” said Mark Cabana, head of US strategy at Bank of America. “It’s going to be hard for him to look as obscene as he is.”
But Powell is expected to continue to stress that the Fed will keep rates low for a long time and keep its policies light to help the economy.
Improving forecasts
Last week, economists stepped up tracking forecasts for gross domestic product in the first quarter, fueled in part by an unexpectedly strong 5.3% jump in January retail sales.
Goldman increased growth in the first quarter to 6%, and Morgan Stanley said it was looking for 7.5% in the first quarter. Economists linked the surprise gain from retail sales to stimulus checks sent to individuals in the latest $ 900 billion stimulus program approved by Congress in late December.
The Biden administration has proposed another $ 1.9 trillion Covid aid package. This could come before the House of Representatives next week.
“[Powell’s] I’m going to stick to the script. The scenario is that parliamentarians must continue to provide support to the economy. It will support the administration’s effort to get an important package, “said Mark Zandi, chief economist at Moody’s Analytics.
Key dates during the week
Earnings continue to be important. There are more than 60 companies reporting, including Home Depot, Macy’s and TJX.
Key economic reports that decline next week include durable goods on Thursday, along with personal income and spending data on Friday
Friday’s report includes the personal consumer price index, which the Fed monitors. The market is looking for signs of rising inflation.
“I think the boom is going to start sooner than most people think,” said Ed Keon, chief investment strategist at QMA.
He said the stronger economy is contributing to a 10-year increase in Treasury yields, which reached a one-year high of 1.36% on Friday. Keon said the vaccine launch helps the prospects, as does the slow spread of the virus.
“I think people were expecting a boom in the second half, but I think the second quarter will be very strong because people are changing their behavior,” he said.
“Attention when it comes to savings and not going out will disappear faster than we think,” Keon said. “Right now, you may see a 10% increase in GDP in the second or third quarter. This is also due to the fact that it is possible to get a big stimulus package.”
He said investors underestimate the growth in economic activity that should begin in March and turn into steam in the second and third quarters as more people resume meals and other activities.
“I think the world will look very different than in the last 12 months. We’re still climbing. We’re still overweight,” Keon said.
He said a flood of money could affect the economy.
“The size of the US economy last year was about $ 21 trillion,” Keon added. “Households now have savings in excess of about $ 1.5 trillion, and the stimulus package is likely to be close to $ 1.2 trillion.”
He said the services sector should start to see a benefit that has raised the commodity-producing side of the economy. – You’ll see an incredible boom.
The calendar of the week before
months
Earnings: Dish Network, Royal Caribbean, Marathon Oil, Ingersoll-Rand, Occidental Petroleum, Transocean, Zoominfo, ONEOK, HSBC
10:00 am 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
9:00 am FHFA housing prices
9:00 am S & P / Case-Shiller house prices
10:00 am Fed Chairman Jerome Powell, Half-Yearly Economic Testimony Senate Banking Committee
Wednesday
Earnings: Lowe’s, NVIDIA, Viacom, public storage, reservations, TJX, Brookdale, Royal Bank of Canada, Apache, Petrobras, pure storage, L brands, Casper Sleep
7:00 am Mortgage applications
10:00 am New home sales
10:00 am Fed Chairman Powell, Half-Yearly Economic Testimony to the 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
8:30 am Fed Chairman of the Atlanta Fed, Raphael Bostic
8:30 am Jobless claims
8:30 am Durable goods
8:30 am Q4 GDP second reading
10:00 am Awaiting home sales
10:00 am Advanced economic indicators
10:00 am James Bullard, President of the St. Louis Fed
3 p.m., New York Fed Chairman John Williams
Friday
Earnings: Fluor, Cinemark, Draft Kings, Foot Locker, AMC Networks
8:30 am Personal income and expenses
8:30 am Advanced Trade
9:45 PM Chicago PMI
10:00 am Consumer sentiment
Saturday
income: Berkshire Hathaway