02|09|2021

Market Disruption | February 5, 2021

AUTHOR: Kerry J. Hilsabeck, CFP®
TITLE:    Investment Adviser Rep
TAGS:   Unemployment, Consumer Goods & Materials, Non-Defense Capital Goods, Housing & Building, Yield Curve, Manufacturing & Services, S&P 500


The S&P 500 surged across the week. Will it continue or is more market disruption likely?

Monday

Markets rallied strong on Monday to open the week. In doing so, they recovered a good amount of the losses from the prior week. The main piece of economic data was a weakening manufacturing PMI, as it slipped to 58.7 from 60.5. While weaker, it is still well above the 50 mark which delineates between expansion (above) and contraction (below).

Tuesday

The drive higher continued on Tuesday. The markets surged again, as the Game Stop trade from the prior week continued to unwind. Economic data was light on the day. Focus internationally was on the chance that Mario Draghi may be asked to form a new government in Italy. The former ECB chair is someone that investors feel could be EU friendly.

Wednesday

Markets were fairly flat at the end of trading. Mario Draghi was asked to form a new government for Italy, but that was not enough to excite markets. Energy and communication stocks led the way higher. Overall, however, it felt like a breather day after two days of strong gains.

Thursday

The S&P 500 pushed higher again on Thursday, as markets worked to erase the losses from last week. The sectors that led higher were Financials, Technology, and energy shares. Initial jobless claims fell more than expected and factory orders beat expectations. Helping lead the charge was expectations that the Federal Reserve Board (FRB) may no taper stimulus anytime this year.

Friday

Jobs Day! The first Friday of every month is Jobs Friday. The unemployment rate fell to 6.3% for January, however, job growth slowed to 49K job when 105K jobs were expected. The participation rate fell to 61.4% which impacted the overall rate. Under-employment fell to 11.1%, the lowest rate since the start of the pandemic (it reached 22.8% in April).

Conclusion

The S&P 500 rose 4.65% for the week. The strongest weekly gain since November. Markets were very upbeat across the week. The unwinding of the Game Stop trade allowed markets to set fresh highs in the process. A repeat of the Game Stop event, while possible is unlikely as investors are aware of the trade behavior now.

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