1. Moving the markets

The futures markets continued their rebound from yesterday into the regular session and recouped all of Friday’s losses. Propped up by Biden’s $1.9 trillion fiscal stimulus package, traders and algos alike shoved the markets higher with the major indexes never threatening to dip into the red.

Helping the bullish mood was willingness by the Fed to support markets, as well as news of a “stepping up” of the vaccine rollout. An additional assist came from Janet Yellen, the designated nominee for Treasury Secretary, who urged to “act big:”

“Neither the president-elect, nor I, propose this relief package without an appreciation for the country’s debt burden. But right now, with interest rates at historic lows, the smartest thing we can do is act big,” said Yellen. “I believe the benefits will far outweigh the costs, especially if we care about helping people who have been struggling for a very long time.”

Hmm… going “big” is just not a term that I like to hear, since it implies the sort of recklessness in terms of debt/deficits that only a politician can come up with. But it was exactly what Wall Street wanted to hear and as a result equities, bonds and precious metals gained, while the US Dollar dropped.

Though the Nasdaq led by adding +1.53%, it was bested again by SmallCaps (IWO), which surged an impressive +1.95%. Even GLD held ground for a change and gained +0.82%.

If tomorrow’s inauguration goes as anticipated, we may see a relief rally only due to the last remaining election uncertainty having been removed.

1. Moving the markets

An early rally bit the dust during the last 2 trading hours with the major indexes surrendering early gains and dumping into the red. Given recent advances the drop was modest with the Dow and Nasdaq faring the best with a loss of -0.22% and -0.12% respectively.

MidCaps and GLD hung around the unchanged line, while SmallCaps bucked the weakness in the markets by powering ahead +2.08%, thereby increasing their YTD gain to around +10%.

The focus of the day was Biden’s upcoming stimulus plan, which had traders on edge all session, and even the pre-programmed computer algos were not able to maintain bullish momentum into the close.

Added CNBC:

President-elect Joe Biden is expected on Thursday evening to unveil a stimulus plan that will include a boost to the recent $600 direct payments, an extension of increased unemployment insurance and support for state and local governments. The stimulus could be as big as $2 trillion.

On the economic front, traders had to digest worse than expected Initial Jobless Claims Data, which rocketed to their highest since August. A stunning 965k Americans filed for the first time, which was a massive increase over last week’s 784k and way above expectations of 789k. This again confirms the disappointing trend in economic data.

The US Dollar initially rallied but then hit a glass ceiling, bounced off and headed sharply south. Gold’s overnight’s spike lower reversed, but in the end, the precious metal drifted south and was not able to hang on to its gains.

Bond yields spiked again with the 10-year now at 1.13% after having dropped below 1.9% intra-day. Much of tomorrow’s market direction will come from the interpretation of Biden’s fiscal bonanza speech tonight. Anything less than expected will likely give the bears some support, though possibly only for the short-term.