1. Moving the markets

After yesterday’s euphoric dash to all-time highs, the futures continued their relentless march higher, still boosted by optimism that a giant wave of fiscal spending will not only power corporate earnings but also revive, or rather rescue, economic growth.

However, that reckless enthusiasm was tempered somewhat during the regular session with the major indexes riding the range and closing just about unchanged. Despite clinging to the unchanged line, the Nasdaq and S&P managed to eke out another record.

The tech sector has been the big dog over the past couple of sessions, with the Nasdaq powering ahead by +0.55%, thereby clearly outperforming SmallCaps (IWO), which surrendered -0.81% on the day.

Of course, the vaccine story remains in the headlines:

Equities closed at record highs in the previous session as President Joe Biden was sworn into office, ushering in hope that an improved vaccine rollout will ensure a smoother and faster reopening. Some on Wall Street are optimistic that Biden’s plans to combat the pandemic will give the stock market a further boost through 2021.

On the economic front, things continue to look dicey in the employment arena. We learned that 900k Americans filed for first-time unemployment benefits last week, which is at 4-month highs. While that is below the expected 935k number, it is nevertheless a horrific stat.

It’s hard to say whether theses consistently bad numbers point to trouble on the horizon, but they pretty much assure us ongoing central bank interventions and more stimulus programs.

Tweeted my favorite analyst Sven Henrich:

And there you have it from a different viewpoint. It’s not the economy that determines market direction—it’s the creation of “free” money, also known as global liquidity, which powers the investment universe.

1. Moving the markets

The futures markets bounced around in record territory supported by positive earnings and continued prospects of much more stimulus as Biden prepared to take charge.

This bullish bias was sustained from the opening bell and, after a smooth transition of power, the major indexes shifted into overdrive and never looked back.

The top gainers in the ETF arena changed a bit when, after an early strong surge, SmallCaps (IWO) lost their momentum and closed off their highs but still with a respectable +0.41%, especially given recent stunning advances.  

The Nasdaq ruled with a strong finish of +1.97%, but it was bested by one of our holdings, namely SCHG, which rose a chest pounding +2.63%. Even GLD, which traveled a roller-coaster all day, thanks to swings in the US Dollar, ended the day +1.62% but still short of its $1,900 level.

Of course, it’s all about the stimulus and hopes for a speedy recovery, no matter what the cost, however caution is warranted:

“The market is rallying on hopes for a speedier recovery,” Peter Cardillio, chief market economist at Spartan Capital, told MarketWatch.

But Cardillio also views equity market as “somewhat overbought” and likely due for a pullback, potentially once markets are confronted with the prospects of at least a partial rollback of Trump-era corporate tax cuts and a tighter regulatory environment. “There will come a point in time when the market will reflect on the new administration’s policies,” he said.

Still, traders were still clinging to Tuesday’s news, during which Janet Yellen, Biden’s designated nominee for Treasury Secretary, endorsed higher aid spending and urged lawmakers to “act big.” Maybe that was the true reason gold to take off today?

So far, earnings season has been viewed as a positive with solid quarterly results, but that is not such a big deal, if you consider that we are merely rebounding off the pandemic lows.

In the end, the eagerly awaited inauguration day came and went without interruption, so today’s ramp higher could certainly be interpreted as a relief rally.

It’ll be interesting to see if there is more follow through to the upside coming our way.

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.