January 11, 2021

Weekly Market Commentary January 4th to January 8th 2021

There was no lack of news to begin the new year. Markets shrugged off political unrest at the Capitol and saw the Democrats’ dual wins in the Georgia Senate races as an opportunity for increased stimulus spending, which juiced markets. There were also a number of vital economic reports released during the week, including the monthly jobs report.

Employers cut 140,000 jobs last month, driven by a loss of 392,000 from restaurants and bars. State and local governments also slashed payrolls, as tax revenue has dried up during the pandemic. This was far worse than the expectation of employers adding 50,000 jobs. There were a few better numbers scattered throughout the report, however. Manufacturers beat expectations by adding 38,000 jobs, as data releases from the industry continue to be positive. Also, the last two jobs reports were revised upwards by 135,000, which helped the Labor Force Participation Rate stay flat at 61.5%. Wage growth looks impressive at 5.1%, but the number is artificially higher since so many low paid jobs have been lost due to economic slowdown and pandemic restrictions.

In another look at the labor market, Weekly Jobless Claims came in unchanged from last week at 787,000. Continuing Claims continue to move lower and beat expectations, this time coming in at 5.07 million versus an estimate of 5.2 million.

The ISM Manufacturing survey came in much higher than expected, driven by higher prices for goods and increased employment. Durable Goods Orders and Factory Orders both topped expectations as well, showing that the industrial economy is holding up very well even as other sectors of the economy have hit the skids.

Stocks continued to rise despite the turbulent week. The benchmark S&P 500 was up 1.8% to a record finish of 3,824 on Friday. The NASDAQ, which is heavily influenced by technology stocks but also includes health care and consumer companies, rose 2.4% to 13,202. The yield on the 10-year U.S. Treasury skyrocketed, as investors looked for higher inflation and moved into stocks. It ended the week at 1.11%, up 20 bps, marking the biggest move we have seen in bonds since the pandemic began.

Key economic releases for next week include the CPI inflation report, the NFIB survey on small businesses, and Retail Sales figures.