Weekly market update 01/01/21. The major US indexes hit all-time highs but ended the week mixed, with small-caps recording losses. Stocks closed out a year of solid gains led by the technology-heavy Nasdaq Composite Index, which notched its best annual performance since 2009. Health care shares outperformed within the S&P 500 Index, and consumer discretionary shares were also strong, helped by gains in a new arrival to the index, electric vehicle maker Tesla. Energy stocks lagged, and the large technology sector was also weak. Trading was relatively light ahead of the market’s closure on Friday in observance of the New Year’s Day holiday.
Stocks began the week on a positive note, helped by President Donald Trump’s signature of a USD 900 billion coronavirus relief bill on Sunday night. The Dow Jones Industrial Average rose 197 points (0.7%) to 30,606, the S&P 500 Index was up 24 points (0.6%) at 3,756, while the Nasdaq Composite was 18 points (0.1%) higher at 12,888. For the year, the DJIA rose 7.3%, the S&P 500 Index gained 16.3%, and the Nasdaq Composite jumped 43.6%.
Three giants—Apple, Amazon.com, and Microsoft —generated 53% of the S&P 500′s total return in 2020,. Furthermore, information technology—just one of 11 sectors overall—accounted for about 69% of the index’s total return.
Shares in Europe rose over the week, lifted by the UK-European Union (EU) trade accord and the approval of the U.S. fiscal stimulus package. The UK’s FTSE 100 Index recorded modest losses, partly due to the stronger British pound, which reached USD 1.3675, its highest level in a year. The pan-European STOXX 600 edged 0.3% lower, still staying close to a 10-month high.
The STOXX 600 index recorded a 3.7% drop in 2020. Still, the index is only 7% below its record high after rallying about 50% from March lows and as expectations of more stimulus, the rollout of coronavirus vaccines and a Brexit trade deal sealed last week raised bets on a stronger recovery in 2021.The FTSE 100 fell 1.5% and Paris’s CAC 40 dropped 0.9%. Spanish stocks fell 1%.
The UK government extended its strictest restrictions to additional areas, seeking to curb a surge in infections, hospitalisations, and deaths caused, in large part, by a new variant of the coronavirus. After regulatory approval, the authorities began deploying a second vaccine, one produced by AstraZeneca and Oxford University, enabling the government to accelerate its inoculation program. EU countries began to distribute the Pfizer/BioNTech vaccine to those most at risk. The EU also exercised its option to buy another 100 million doses of the vaccine.
Japanese stocks rallied in the shortened trading week through Wednesday. The Nikkei 225 Stock Average advanced 3.0% (788 points) and closed at 27,444.17, just off the 30-year closing high set on Tuesday. For the year, the benchmark gained 16.0%. Neither the large-cap TOPIX Index nor the TOPIX Small Index, broader measures of the Japanese stock market, performed as well. In 2020, the TOPIX gained 4.8% and the TOPIX Small Index recorded a -2.2% return. The yen was modestly stronger versus the U.S. dollar and closed the year near JPY 103, about 5.0% stronger versus the U.S. dollar.
Chinese stocks finished the week at multiyear highs as investors anticipated stronger growth in 2021. The country’s benchmark SSEC Index rallied Friday to its highest close since February 5, 2018, while the blue chip CSI300 Index recorded its highest close since June 15, 2015, according to Reuters. For the year, the SSEC Index advanced 14% and the CSI300 Index rallied 27%, buoyed by signs of an accelerating economy as China became the first major world economy to successfully contain the coronavirus.
The fading likelihood of larger stimulus payments due to roadblocks in the Senate, along with month-end buying activity, pushed the yield on the benchmark 10-year U.S. Treasury note modestly lower as the week progressed. (Bond prices and yields move in opposite directions.) Meanwhile, the broad municipal bond market recorded modest positive returns through mid-week, outpacing Treasuries. Crude-oil prices are back near $50 a barrel after briefly dropping below $0 for the first time ever in April.
The upcoming week will see the PMI composite, Unemployment Rate, and Factory Orders data being released.
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