After a cautious start, the New York Stock Exchange trended slightly higher on Tuesday evening, supported by the prospect of a new stimulus plan in the United States, which will be presented Thursday by President-elect Joe Biden. Risk appetite continues to drive up long-term interest rates, leading investors to undervalued cyclicals, which should benefit from fiscal and monetary stimulus.
Two hours into the close, the Dow Jones index gained 0.2% to 31,070 points, while the broad S&P 500 index rose 0.11% to 3,803 pts, and the Nasdaq Composite index, rich in stocks technological and biotech, recovered 0.31% to 13,076 pts.
The tense political situation ahead of Joe Biden’s swearing-in on January 20, however, limits the gains, as does the evolution of the Covid-19 pandemic. Finally, the markets are awaiting the start of the Q4 2020 earnings season, which will be smooth this week, with Delta Air Lines (Thursday) and several banks on Friday, including Citigroup, JP Morgan. and Wells Fargo.
Growth stocks abandoned in favor of “value”
Among the sectors in decline on Tuesday were utilities (-1.2% for the S&P 500 sector index) and real estate (-0.6%) which suffered from a rise in rates. Technologies lost 0.6% and communication services also fell for the 2nd session (-1.7%), under the weight of Twitter (-2.1%) and Facebook (-1.7%), in front line in the controversy over the controversial use of social networks by Donald Trump and his supporters.
On the rise, are the sectors that will benefit from the economic recovery, namely energy (+ 2.8%), consumer discretionary (+ 1.4%), financials (+ 1%) and basic materials (+ 0.7%).
Oil markets rebound after a pause on Monday, counting on a recovery in demand in 2021 thanks to very generous economic and monetary policies on the part of the future Trump administration and the Federal Reserve. US WTI light crude is back 1.4% to $ 52.98 per barrel (February Nymex futures contract), while North Sea Brent is up 1.5% to $ 56.49.
US 10-year rates at their highest for 10 months
Supported by the hopes of fiscal stimulus by the Biden administration, the yield on the 10-year T-Bond continues to climb, reaching 1.18% on Tuesday (+3 basis points), returning to its levels of March 2020, against 0 , 9% a week ago … Risk appetite and the anticipation of a massive influx of sovereign debt issuance to finance the stimulus plans pushed investors to sell bonds, which mechanically drives up interest rates, especially long-term ones.
The dollar index paused on Tuesday, losing 0.19% to 90.52 points, while the euro gained 0.37% to $ 1.2193. The greenback, however, rebounded 1% from its low on January 6 in session, benefiting from higher rate and inflation expectations going forward, in favor of the expected economic recovery.
Gold remains volatile, with an ounce falling 0.4% Tuesday to $ 1,844.20 for the February Comex futures contract. The yellow metal plunged 4.1% on Friday, before gaining 0.8% on Monday. In the short term, its status as a safe haven is shaken a bit by the sharp rise in long-term interest rates, which has made sovereign bonds more attractive compared to the barbaric relic (which offers no return). Bitcoin, even more volatile than gold, rose to around $ 34,800 on Tuesday evening (+ 12% in 24 hours) after a 15% fall on Monday, and after having approached $ 42,000 last Friday.
Too early to talk about reducing Fed support?
Several Fed members spoke on Tuesday, including Dallas Fed President Robert Kaplan. The latter was rather optimistic about the recovery in 2021, with an expected rebound of 5% of GDP and a decline in the unemployment rate between 4.5% and 4.75%. What is already starting to think, according to Mr. Kaplan, of a “tapering”, that is to say a reduction in asset purchases by the central bank, which has bought bonds on a massive scale since March 2020 to support the markets.
Two other Fed officials, however, were much more measured on the “tapering”. Richmond Fed Chairman Thomas Barkin said it will be necessary to wait for the Fed to observe significant improvements in terms of employment and inflation before launching a discussion on the subject. And Raphael Bostic, the boss of the Atlanta Fed, sees no change in monetary policy this year, and thinks that a lot of progress will still have to be observed before re-examining the asset buyback policy.
On the political level, six days after the violent intrusion of supporters of Donald Trump on Capitol Hill, Democratic parliamentarians are continuing their attempt to impeach the outgoing president, accusing him of “inciting an insurgency”. The text could be discussed Wednesday in the chamber and if adopted, it will still have to collect a two-thirds majority in the Senate, which will be difficult to obtain. Another resolution calling on Vice President Mike Pence to prematurely remove Donald Trump from office will be presented to the House on Tuesday.
Fears of further violence as January 20 approaches
While the Capitol riots did not shake the markets last week, some are worried about a climate of violence which, if it were to take hold in the United States, would be detrimental to the confidence of investors in the country. .
According to sources quoted by ‘Reuters’, the FBI is concerned about the risk of armed protests before January 20, the day of the inauguration ceremony of Joe Biden as the 46th president of the United States … Faced with the risk of Unrest related to the actions of supporters of Donald Trump, the United States National Guard has been authorized to deploy up to 15,000 personnel to the federal capital to help maintain order during the inauguration ceremony.
Washington Mayor Muriel Bowser called for a state of emergency to be declared upstream in the federal capital in order to obtain additional funds for security, which Donald Trump endorsed on Monday evening. However, the resignation on Monday evening of Acting Homeland Security Minister Chad Wolf added to concerns over this difficult transition period. Recall that Donald Trump, who acknowledged his defeat only with a hint, announced that he will not participate in Joe Biden’s swearing-in ceremony, contrary to American tradition.
Joe Biden expected Thursday on his support plan
Investors are also focused on the evolution of the health crisis and on the highly anticipated new support plan from the Biden administration. The president-elect announced on Friday that he would present his economic program on Thursday, and pledged “trillions” in aid. The press spoke of a new “package” of 3,000 billion dollars, which would roughly double the amount already injected by the federal state, in several stages, since March 2020 to support the economy.
Joe Biden said he was in particular in favor of paying a new aid check of $ 1,400 per American to overcome the current crisis. This amount would accumulate with the $ 600 paid under the minimum plan adopted before Christmas by Congress to bring the total aid to $ 2,000 per adult.
9 million Americans vaccinated against the coronavirus
In terms of health, the vaccination campaign continues in Europe and the United States, a race against time as the number of cases continues to climb, in particular under the effect of the spread of the new British variant of Covid-19 . The number of deaths has reached 1.92 million worldwide, including more than 376,000 in the United States, the country most bereaved by the pandemic. Across the Atlantic, the number of proven cases of Covid-19 has now exceeded 22.6 million, with a record of 300,000 per day reached last Friday.
Since the start of the vaccination campaign, nearly 9 million Americans have received at least one injection (of the two needed to be highly immunized) and 25 million doses have been released, figures which are impressive, but which are lower than the initial forecasts of the American authorities.
VALUES TO FOLLOW
AstraZeneca (-0.7% in New York). The British laboratory has filed with the European health authorities its application to market the vaccine against Covid-19 developed with the University of Oxford. The European Medicines Agency (EMA) announced on Tuesday that it had received this authorization request, specifying that it would proceed to an expedited examination, with a decision which could be rendered on January 29, if the data communicated is sufficiently “robust and complete “.
Facebook (-1.7% after -4% Monday) and Twitter (-2.1% after -6.4% Monday) continue to suffer from the controversy over the role of social networks in the outbreak of violence that led to incidents at the Capitol on January 6, killing 5 people. Twitter, which permanently suspended Donald Trump’s account from the social network, also indicated that it had suspended since Friday more than 70,000 accounts dedicated mainly to relaying content from the QAnon conspiracy movement, in the face of the risk of violence.
Alibaba (+ 0.3%) / Tencent (+ 1.2%). Sources familiar with the situation cited by Reuters indicate that China is asking its tech giants Tencent, Ant or JD.com to share their customers’ credit data in order to avoid fraud or inappropriate credit. The Chinese government is further hardening its efforts against local ‘tech’ leaders. Alibaba, whose founder Jack Ma has disappeared, even plunged 3.7% yesterday on Wall Street on fears of nationalization.
Intel (+ 3.4%), the California leader in microprocessors, intends to call on Taiwan Semiconductor Manufacturing (TSMC) for the manufacture of a new generation of seven-nanometer PC processors to face rival Nvidia (-0.5%), said two Reuters sources ‘close to the matter’.
Walmart (+ 1.6%), the colossus of supermarkets based in Arkansas, has lifted the veil on a partnership with the investment firm Ribbit Capital to create a company dedicated to new financial technologies .
Abercrombie & Fitch (+ 1%) is resisting. The fashion group indeed anticipates a less significant drop in revenues than expected in the fourth quarter, with the performance of online sales.
Steris (-3.7%) and Cantel Medical (+ 2.6%) are discussing a merger, according to people familiar with the matter cited by the Wall Street Journal. The deal could include stocks. No precise valuation is advanced.
Plug Power (+ 15%) and Renault have announced the signing of a memorandum of understanding for the creation of a 50/50 joint venture established in France, by the end of the first half of 2021, targeting more than 30% market share of hydrogen light commercial vehicles in Europe. The JV will locate cutting-edge activities in France for research and development, the manufacture of fuel cell systems and their integration into vehicles.
Lucid Motors is reportedly discussing a potential IPO through a merger with Churchill Capital Corp IV, Bloomberg reported, citing people familiar with the matter. The deal could be as high as $ 15 billion, with Lucid currently working with his financial advisers. Churchill Capital had previously expressed interest in buying a stake in AT&T DirecTV’s satellite TV unit.