House passes $ 2,000 direct payments, but Senate approval harder
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(Open Tuesday Market) That’s the $ 2,000 question.
Will the Senate vote this week to approve the $ 2,000 checks to Americans or will this idea die in the upper house of Congress? Some economists say that an extra boost of $ 2,000 could potentially give the economy more firepower in 2021.
The House passed a bill raising the payment to $ 2,000 on Monday, and Senate Minority Leader Chuck Schumer will attempt to pass the House bill by unanimous consent on Tuesday. Republicans are expected to oppose it, which could mean a vote in a few days that would require 60 senators.
Better growth in sight in 2021: Goldman Sachs
It remains to be seen what happens in Washington. However, Goldman Sachs (NYSE: SG) raised its estimate of first-quarter gross domestic product (GDP) growth to 5% from their previous 3%, saying consumers remain ‘resilient’ and that a ‘vaccine boost’ could bring a rebound for the industries hardest hit by the virus. It is also experiencing growth over the whole of 2021 well above 5%.
If that happened, it would be the best calendar year growth for the US economy since 2000. The average analyst estimate is more in the 4% category, but it is outside of an average estimate. of a GDP drop of 3.5% this year.
An extra $ 2,000 in people’s portfolios could force analysts to return to their desks to update these estimates. Remember that consumer spending is about 70% of the economy. It doesn’t look very good as the end of the year approaches, with last month’s retail sales sluggish and some on Wall Street worried the latest wave of closures could hurt job growth in December. .
However, keep in mind that holiday shopping may have started earlier this year due to more people working from home. This could have had the effect of spreading it over a longer period so that no month would emerge.
For things to really improve on the consumer side, investors may need to rely on a rapid and smooth rollout of vaccines. As we said, this is a huge logistical challenge. However, it also didn’t look like Congress could adopt a stimulus in a lame session, but it was. So where there is a will, there may also be a way with the vaccine. It’s good to see that more than two million Americans have already been vaccinated, according to media reports, but some medical experts believe progress is slower than expected.
Home field advantage
Going back to this week in the market, there is some data on the way tomorrow in the form of pending home sales for November. This category looks a bit soft, with the Briefing.com consensus pointing to a possible 0.5% drop from the previous month, which itself had seen a 1.1% drop.
When you look at pending sales, they should be viewed as a barometer of future home purchases. Right now, it looks like demand for housing may exceed supply. This means that prices are likely to continue to rise, and that could be good news for home builders like Lennar (NYSE: LEN), DR Horton (NYSE: DHI), and Home Ko (NYSE: KBH). However, shares of all three were down on Monday.
Other data to prepare includes weekly crude oil production and supply, which we will discuss more about tomorrow, and weekly initial jobless claims.
Remember, it’s a short week, with everything closed on Friday. With that in mind, it wouldn’t be surprising to see a defensive posture take hold over the next few days. Already there are signs. The 10-year yield edged down to around 0.92% on Monday, crude prices fell and the Cboe volatility index (VIX) held a small rally. None of these moves seemed too dramatic, but it’s worth watching in the coming days for some insight into investor psychology.
On Monday, so-called “mega-caps” took the wheel to push major indices to new highs (see more below). There didn’t seem to be much news behind this, and the volume was a little below normal on the New York Stock Exchange (NYSE), which makes sense given the time of year.
Yesterday, other sectors received an interesting offer, in particular those of “reopening” such as hotels, theme parks and airlines. It looks like air travel was pretty big during the holidays, so some investors may have reacted to that.
Speaking of plane travel, Boeing (NYSE: BA) has a milestone today as American Airlines (NASDAQ: AAL) puts a 737-MAX into passenger service for the first time since the entire fleet came to a standstill in March 2019. It has been a long road for the airliner and for BA, whose stock remains much lower to what it was before the tragic accidents.
TABLE OF THE DAY: FAANGs and FRIENDS. This chart from the beginning of the year of the NYSE Faang + index (NYFANG – candlestick) includes the five “FAANG” as well as five other similar stocks like Nvidia (NASDAQ: NVDA) and You’re here (NASDAQ: TSLA). As the chart shows, these 10 stocks significantly outperformed the Nasdaq (COMP — purple line) in 2020, but some analysts are wondering what they can do for a repeat in 2021. Data sources: ICE, NYSE, Nasdaq. Chart source: The TD Ameritrade thinkorswim® platform. For illustrative purposes only. Past performance is no guarantee of future results.
Profit taking? We barely knew you! A week or two ago, the thought on Wall Street was that the last two weeks of 2020 could see some profit taking after this long rally. This probably made sense considering the S&P 500 Index (SPX) is up about 14% since November 1 and we have a new administration in Washington next month that could try to make tax changes that could affect investors. The idea was that some people could close profitable positions in the last week of 2020 to profit under existing tax laws.
Well, there are three days of trading left this year, but if Monday was a sign, analysts who focused on possible profit taking seem to have been wrong. It’s more like a ‘the trend is your friend’ mood, although that could of course change from today to Thursday. In fact, the same sectors (Communications Services, Info Tech) that came to the party this fall stayed on the dance floor on Monday to help lead the rally. It’s just one day, obviously, and things could change. Still, it gives you an idea of how these sectors continue to be blocked. At the same time, some of the hottest “stay at home” stocks fell on Monday, which could mean a small profit was made.
Faang leads the way: A quick glance at Monday’s rally shows how the so-called “FAANG plus one” stocks Microsoft (NASDAQ: MSFT). Apple led the gains with a march to new all-time highs above $ 136 a share, but Amazon (NASDAQ: AMZN) and Facebook (NASDAQ: FB) has also increased sharply. After a year of 2019 in which some analysts said the FAANGs have already had their day in the sun and it is time to move on, 2020 has been a banner year for these six stocks. AAPL is up nearly 86% year-to-date, while MSFT is up 43%. FB and Alphabet (NASDAQ: GOOGL) are up 34% and 33%, respectively, despite the challenges they both faced this year with Congressional inquiries into their competitive practices. Meanwhile, AMZN is up 78% in 2020 despite flattening in recent months. Netflix (NASDAQ: NFLX) is in the middle with gains of nearly 57%, benefiting from a good advantage of the economy “at home”.
Can the FAANGs continue to run in 2021? As we’ve already noted, COVID-19 has likely helped most or all of the FAANGs this year, in part because they could all thrive in a shutdown economy and because when the going gets tough, investors tend to adopt well-known entities. The lack of competition from any other market, such as fixed income, along with the low interest rates that have encouraged many people to invest their money in stocks, have also helped FAANG.
The question is whether this is a fresh start or whether the supposed “sunset fade” has just been pushed back a year or two. Many analysts will tell you that these companies have tougher years to come simply from the perspective of tough comparisons and people with high expectations. Some on Wall Street believe the next wave of the tech rally could be more focused on chip or cloud stocks. We will talk about this more in the days and weeks to come.
Good trade,
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TD Ameritrade® commentary for educational purposes only. SIPC member.
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