[Chart courtesy of MarketWatch.com]

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.

[Chart courtesy of MarketWatch.com]

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.

[Chart courtesy of MarketWatch.com]

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.