Markets faded across the week. The shift from green to red was pretty dramatic. What was the cause?
Monday
Markets rose on Monday. The week started with an optimistic tone as we enter corporate earnings season and with potential of Phase 4 stimulus in heavy discussions. Additionally, the EU is nearing a deal for fiscal stimulus, which would change the landscape for the EU going forward. These factors contributed to a melt up in tech stocks.
Tuesday
The EU announced a fiscal deal for €750B to aide in the rebound from COVID. In doing so, the EU has forged a strong fiscal union, binding member nations together for a backstop of all members. In addition, IBM beat estimates and Coca-Cola (KO) projected better sales ahead. Optimism was focused to the S&P 500, in a rare day of leadership in recent history over the NASDAQ.
Wednesday
Markets rose on Wednesday on news that the US will purchase 2 Billion doses of a COVID vaccine from Pfizer. This led optimism, but leadership was focused on safer holdings, such as utilities, healthcare, materials, gold, and silver. The flight to safety could have been related to moves by the US to close a China Embassy in Houston. The rise in tensions could raise concerns that the phase 1 trade deal could be in jeopardy.
Thursday
Tesla beat market expectations and posted earnings for the 4th consecutive quarter. This makes it eligible for listing on the S&P 500. They also announced that they will begin delivery of Electric Semi’s in 2021. This optimism was erased before markets opened as initial jobless claims increased to 1.45M after 1.3M was expected. A wave of increased closures across the nation appear to be taking a toll on the jobs market. Exacerbating the day were rising conflicts in trade and reports that Brexit is a long way from done.
Friday
Markets closed the week on a down note. Earnings season is well underway and disappointing for the most part. Adding stress to a weak earnings season is continued tension between the US and China. China has retaliated at our request to close an embassy, requesting the same in a heavily populated Chinese city.
Conclusion
The week faded from a strong open. The stresses from on-going fractures in the global economy proved too much to keep the early optimism afloat. Fiscal Stimulus proved too weak in the face of an unresolved Brexit, weak jobs data, and a trade war that appears to be expanding.
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