The indices are breaking out to new highs despite the ongoing rise in new cases of the coronavirus. Stock markets are forward looking instruments which means they are messaging that 2021 will be a year of recovery for the global economies.
More stocks are participating in this rally (good breadth) as sectors that have been in multi-year downtrends like energy and steel are showing a turnaround. These sectors are under-owned and could take the baton as market leaders as there is likely a good deal of pent-up demand for commerce in the coming year.
For now, volatility continues to fall and the trend remains to the upside. Two charts this week. The first is the S&P 500 which may be trying to carve out a new uptrend channel.
The second chart is of the Russell 2000 which is comprised of small cap stocks that grow the most when the economy is healthy. The difference in this chart from the S&P is that the Russell 2000 has not made a new high in over two years and has lagged the other indices. The low in March of this year for this index is clearly the end of a two year correction and there is a clear break-out to new highs. A solid breakout that the other indices will follow in time.
Chart of the Week!
Not a great chart for commercial real estate.
Economic & Central Banking Snippets
- The U.S. economy added 245,000 jobs in November, as the unemployment rate ticked down to 6.7%, signaling a sharp slowdown in the labor-market recovery. Also, the U.S. labor force is 2.2% smaller than in February, a loss of 3.7 million workers. The labor-force participation rate, or the share of Americans 16 years and over working or seeking work, is near its lowest since the 1970s, when far fewer women were in the workforce. (WSJ)
- The unemployment rate in the Eurozone in October was 8.4%, down one tenth from September and again, job saving programs in some countries have limited the pandemic damage. (Boock Report)
- The world’s appetite for debt is smashing records. Global debt is on track to hit $277 trillion by year-end—a record 365% of world gross domestic product. The huge sums reflect how the Fed and its peers, by slashing interest rates and buying trillions of dollars of fixed-income securities, have helped borrowers ride out tough times caused by the global pandemic. (WSJ)
Macro Snippets
- OPEC and a group of Russia-led oil producers agreed to increase their collective output by 500,000 barrels a day next month. The move signals that the world’s biggest producers are betting the worst of a pandemic-inspired shock to demand is behind them, Benoit Faucon and Summer Said report. (WSJ)
- Warner Bros. movies to hit theaters and HBO Max at the same time. The AT&T-owned studio will release “Dune,” the next “Matrix” film and its entire 2021 slate of theatrical films in cinemas and on HBO Max, taking the most drastic step yet in eliminating the exclusivity theater chains have enjoyed for decades. (WSJ)
- Movie theatre company AMC says it might go bankrupt if you don’t buy its stock. AMC Entertainment Holdings’ effort to sell more than $700 million worth of stock could help the movie-theater chain avoid a debt default, if it can generate enough dollars to last it until widespread vaccination against Covid-19 helps bring moviegoers back. (WSJ)
- Smith & Wesson Brands: The firearms manufacturer said profit rose in its recent quarter as revenue more than doubled in the period. (WSJ)
- Moderna said all participants in its COVID-19 vaccine study retained high levels of neutralizing antibodies even three months after the second dose. The company has submitted authorization requests to U.S. and European regulators. It expects to have 20 million doses available in the U.S. by year-end and between 100 million and 125 million doses available globally in the first quarter of 2021. (Investopedia)
- November bankruptcy filings in the U.S. hit a 14-year low, driven by a decline in individuals filing for protection from creditors as they continue to enjoy the benefits of eviction moratoriums and other government assistance stemming from the coronavirus pandemic.
- U.S. holiday spending during the Thanksgiving weekend was lower this year compared to 2019, according to the National Retail Federation. Shoppers spent an average of $311.75 on holiday-related purchases such as gifts or decorations, down 14% from last year but comparable to 2018’s $313.29. The number of shoppers in-store and online dropped to 186.4 million from 189.6 million in 2019. The number of in-store shoppers on Black Friday, a day famous for doorbusters, plunged 37%. (Investopedia)
- Steel production is stumbling in the West, but iron-ore prices are surging as steelmakers in China keep output high to support the economic recovery there. Iron ore climbed to $133.05 a metric ton on Tuesday, notching its strongest price in seven years, according to data from S&P Global Platts. The value of steel’s main ingredient, one of the world’s most-traded commodities, has climbed 13% since the start of November, taking year-to-date gains to 45%. (WSJ)
- General Motors Co. scaled back a partnership with clean-energy trucking startup Nikola Corp., scrapping a tentative deal to jointly build an electric pickup truck and replacing it with a non-binding deal to supply hydrogen-fuel technology. (Bloomberg)
That is all for now and thank you for being a subscriber!
Regards,
President – Kisco Capital