US stocks started a moderately abundant week of profits.
Apple AAPL,
Tesla TSLA,
Facebook FB,
and Microsoft MSFT,
they’re all ready to report earnings in an action-packed week that also includes the Biden administration’s first Federal Reserve policy meeting. In fact, almost a quarter of the S&P 500 will show results – with these companies representing 39% of the index by market value, according to data from FactSet.
The COVID-19 pandemic and the launch of vaccines in the U.S. remain in focus as President Joe Biden begins work. Investors will also be closely watching the U.S. fourth-quarter GDP reading on Thursday, with economists polled by MarketWatch expecting a 4% increase. Attention will also turn to recovery in 2021.
In our call of the day, Goldman Sachs analysts were optimistic about the recovery of the US economy in 2021, but said there are three major risks to the recovery. The investment bank projects a 6.6% growth in gross domestic product this year, 2.5 percentage points above the consensus. He expected a reduction in the risk of viruses, caused by mass vaccination, along with fiscal support for consumer spending to fuel an “explosion of consumption in the middle of the year” and “very strong growth” in 2021.
The most serious risk, analysts noted, was the threat of a new strain resistant to the coronavirus vaccine that causes COVID-19 – requiring a new vaccine and another round of inoculations. “Spending on virus sensitivity would likely decrease while a new vaccine is developed, and while a new vaccine could be approved in less than five months, the consumption boom would likely be delayed until 2022,” said Goldman analysts, led by Jan Hatzius, on a note. They added that preliminary evidence suggests that current vaccines protect against the new strain in the UK, but have been more mixed for the South African variant.
The second most worrying risk is that mutations in the virus “significantly increase the barrier” to herd immunity, either because they are more infectious or because they decrease the effectiveness of vaccines. This scenario would also delay the consumption boom. Finally, even though the implementation of vaccination and the warm climate will reduce the spread of the virus, there is a risk that consumers will be more cautious than expected, although the disadvantages are limited, they said.
Most encouragingly, there were some significant upside risks to Goldman’s forecast of 6.6% GDP growth, including households rapidly spending the savings they accumulated during the COVID-19 pandemic and the impact of further fiscal stimulus in 2021.
The tweet
This Morgan Stanley chart shows the NFIB Small Business Optimism Index diverging from the Russell 2000 RUT,
index, suggesting that although sentiment may be turning negative, small cap stocks are up.
The markets
The DJIA of the Dow Jones Industrial Average,
fell 0.7%, or 211 points, at the start of trading, while the S&P 500 SPX,
fell 0.4% and the Nasdaq Composite COMP,
was 0.2% lower. European stocks fell after rising initially due to positive gains and reports of acquisitions by online retailers Boohoo BOO,
and ASOS ASC,
Asian stocks rose overnight, in the hope that some economies will start to recover from the COVID-19 pandemic with easing blockages and progress with vaccine launches.
The buzz
Biden’s top advisers began negotiations with a group of moderate Senate Republicans and Democrats over a $ 1.9 trillion coronavirus aid package on Sunday.
Biden will reinstate coronavirus travel restrictions against foreign citizens coming to the United States from Brazil, the United Kingdom, Ireland and much of Europe on Monday, according to reports, also adding South Africa to the list.
The White House revealed details on Monday of the new Buy American executive order set to be signed by the president. This will increase the cap and price preferences for household products before the government can purchase from a non-American supplier.
China overtook the United States as the world’s top destination for new foreign direct investment last year, according to UN data published on Sunday.
A few days before fourth-quarter earnings, Baird raised its price target for electric car maker Tesla from $ 488 to $ 728 per share, saying “the stock bias continues upwards,” in a note in Monday.
GameStop shares GME,
rose 42% in the pre-market, after shooting 51% higher on Friday. The gains came after short selling company Citron Research and speculative buyers organizing on Reddit clashed with the video game retailer.
AMC of AMC shares,
jumped 34% in the pre-market, as the cinema network raised $ 917 million in debt capital to help it through the COVID-19 crisis.
Random reading
Flaming Lips staging a unique ‘space bubble’ show.
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