Hi, high. Stocks rallied on Friday to new highs on continued optimism about the future… looking past the struggles of today. More people were fired than hired last month, breaking a streak of gains that began with the recovery 7 months ago.
N O T E W O R T H Y
On the beach. You don’t need to be an economist or have an MBA to predict that there just might be some fallout associated with the recent surge in the virus. The healthcare experts warned us and begged us to keep socializing toned down through the holiday. Virus cases were already beginning to pick up in late fall as socializing retreated indoors and folks became less vigilant. The combination of Thanksgiving and Christmas were sure to make bad even worse… and it did. The numbers have picked up leaving Government officials with no choice but to turn up the restrictions. The end result: job losses. Here in New York City outdoor dining offered already struggling restaurants some relief. That combined with indoor capacity limits enabled some, not all, to keep their heads above water until the virus could be contained. Colder temperatures however put a damper on that salve and indoor dining was suspended last month due to a recent surge in cases and hospitalizations. On the west coast where weather is not a factor, virus cases have surged to such high levels that some counties in California have shut down all indoor and outdoor dining. Most other locations across the country have experienced similar surges and subsequent restrictions. It was just a matter of time, but… it happened… as warned. On Friday, the Bureau of Labor Statistics came out with its monthly employment report which showed a loss of -140k Nonfarm Payrolls for December. Economists were expecting a small gain of +50k jobs. The miss and decline in the headline number is disappointing and certainly shows that the economic recovery is stalling. However, if we observe the details, there are some silver linings. First of all, guess where the bulk of the job losses came from? You are right if you guessed Leisure and Hospitality. That aggregate lost -498k jobs in December. Of those losses, -372k jobs were lost in Food Services, you know the ones I spoke about above. But guess what, some categories added jobs. Retail trade actually added 120k jobs last month and Professional and Business Services added another 161k jobs. That is positive! The Government category lost -45k jobs last month, but the losses will likely turn around quickly once the new Administration and Congress are seated. The unexpected… yet expected if you were paying attention… job losses in December is further proof that the recovery is losing steam. That supports the case for further stimulus, which may be around the corner. Later this week President-elect Biden is expected to release his economic stimulus wishes. Many expect stimulus checks to ratchet up to $2000 from $600 along with billions in aid for struggling state and local governments. Vaccinations are starting to ramp up around the country and Spring is just 68 days away… a little over 2 months. Warmer temps will certainly help restaurants in the colder parts of the country. That may help to reverse the alarming trend of job losses. Throw in some stimulus and maybe just a bit of diligence and things can start to look up once again. The markets appear to be counting on some variant of that scenario as stocks found new highs on Friday and long term bond yields continued their recent climb. I too, am counting on it. I miss my favorite restaurants and I am looking forward to getting my extended family together in one place… without video.
Stocks climbed to new highs on Friday on continued stimulus optimism. The S&P500 rose by +0.55%, the Dow Jones Industrial Average climbed by +0.18%, the Russell 200 Index slipped by -0.25%, and the Nasdaq Composite Index added +1.03%. Bonds slipped and 10-year treasury yields climbed by +4 basis points to 1.11%.
– Atlanta Fed President Raphael Bostic and Dallas Fed President Robert Kaplan will both speak today.
– Later this week we will get inflation figures, some regional Fed reports, the Fed Beige Book, Industrial Production, and University of Michigan Sentiment. Earnings season kicks off with the big banks on Friday. Please refer to the attached earnings and economic calendars for details.
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