Happy Friday, Bull Sheeters. There’s plenty of red on the screen this morning. That’s despite a flurry of headlines which the markets of yesteryear would’ve swooned over: President-elect Joe Biden plans to ask Congress for a new $1.9 trillion stimulus spending plan and Fed Chief Jerome Powell wants you to know lower-for-longer is here to stay.
Below, in the weekly “By the Numbers” section, I get into the big winners and losers of the 2021 markets. One is a an old-school auto stock that’s crushing Tesla shares.
Let’s see what’s moving markets.
- The major Asia indexes are closing out the week with a whimper, with Japan’s Nikkei down 0.6%.
- Chinese smartphone maker Xiamo was down more than 10% on Friday after the Trump administration added it and eight other firms to its Chinese military blacklist.
- World Health Organization investigators are on the ground in Wuhan to see if they can uncover any clues on the origins of the coronavirus outbreak that began sickening city residents in December, 2019. It’s off to a slow start.
- The European bourses stumbled out of the gates with the Stoxx Europe 600 down 0.4% at the open.
- Europe’s Christmas restrictions proved pretty ineffective at crushing the curve of COVID-19 cases. Now governments are introducing or mulling even tougher new lockdown measures including a 6 p.m. curfew that will go into effect across France this weekend.
- Fish was a major sticking point of the Brexit trade deal, you’ll recall. Since New Year’s Day—a.k.a., Independence Day—the U.K. market for fresh fish has collapsed, Bloomberg reports, forcing some Scottish fishing vessels to make the long journey to Denmark to sell their catch.
- The U.S. futures point to a weak open after all three major exchanges swung lower in Thursday afternoon trade, closing in the red.
- One of the bright spots yesterday was the flurry of new stock flotations. Petco returned to the public market yesterday with all the swagger of a puppy that’s just successfully raided the sock hamper. Shares closed 63%. And the online shopping bazaar Poshmark did even better in its debut.
- Earnings will be in focus today as JPMorgan Chase, Wells Fargo and Citigroup all report Q4 and full-year results before the bell. Brace yourself for some “messy” results, one banking analyst tells the Wall Street Journal.
- Gold is flat, trading above $1,850/ounce.
- The dollar is up.
- Crude is down, with Brent steady around $55/barrel.
- Bitcoin is flat in the past 24 hours, trading around $38,300, recovering most of the week’s losses.
By the numbers
One major plot line of the 2021 markets is the rally in small-caps. The Russell 2000 is up 9.1% YTD. (The S&P Small Cap 600 is doing even better; it’s up 10.1% in that same period.) At the same time, the blue chip Dow Jones Industrial Average is down 1.5% and the large-cap Nasdaq 100 is flat, up 0.1%. Two major market forces—the vaccine rollout and further stimulus measures—position small caps for further gains, analysts say. Add it all up, and small caps are one to watch at the start of 2021.
You may recall how, in the frothy market days of the late ’90s, inserting the word “e-commerce” in a corporate press release would send shares of even the most pedestrian companies soaring. The equivalent to that today in the automotive world is to talk up your EV ambitions. That gets me to General Motors, which is up 46.6% over the past 12 months, hitting a series of fresh all-time highs along the way. (Who saw that coming this time last year?) Earlier this week GM presented its electric future at CES, attracting even more GM fanboys. The automaker’s shares are up nearly 19% over the past five trading sessions. During the same period, Tesla shares are down 1.3%.
Yesterday, we got another gut-punch of a reminder that the U.S. labor market is far from turning a corner. Unemployment claims jumped sharply last week with the seasonally adjusted tally hitting 965,000, far above economists’ estimates. The problem is that the labor market is broadly weaker, with declines in 36 states, showing that a larger economic decline is under way. The much-watched number of recipients on continued unemployment benefits has ticked up, to 5.271 million. Investors continue to shrug off labor data, but economists aren’t. “The stock market is not the economy—as was often pointed out throughout 2020—however, even the largest companies in the stock market rely on a stronger economy in order to continue to grow revenues,” Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, wrote in an investor note yesterday.
Have a nice weekend, everyone. A reminder: the markets are closed on Monday in observance of the Martin Luther King holiday. As such, Bull Sheet will be off until Tuesday… Until then, there’s more news below.
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