The US stock market has probably entered a consolidation phase with major stock indices near record highs in anticipation of catalysts that can move stocks and sectors higher or lower depending on the fundamentals and on the valuation of stocks. For the previous week, the US stock market posted some moderate losses. Small-cap stocks outperformed.

There is some good news and some not so good news to focus on. The good news is that the FDA approved the distribution of the vaccine made by Pfizer (PFE) and BioNTech (BNTX) and a vaccine campaign has already launched in the USA. With global rising cases of COVID-19, the vaccine for the coronavirus outbreak is the only solution and hope to return to normal business, economic and daily conditions as of late 2019.

The bad news is that a fiscal stimulus is not yet finalized, and there is plenty of uncertainty around it. With disappointing weekly job claims, it is evident that a mix of monetary and fiscal stimulus is needed to boost economic growth and recovery. Last week one of the main comments was that “The stock market is highly driven by expectations and behavioral finance.”

Economic News

The Non-farm Productivity for the Q3 of 2020 came in at weaker than expected with a figure of 4.6%, less than the consensus of 5.0%. This figure reflects the broader business health and economic growth.

The Continuing Jobless Claims number reported was a miss, with a figure of 5.757 M, worse than the forecast of 5.335 M. The Initial Jobless Claims number was weaker than expected too, with a figure of 853 K, higher than the consensus of 725 K. The Consumer Price Index (CPI) Ex Food & Energy came in at 1.6%, same as per consensus, showing not any inflationary pressures at the economy.

The biggest positive news released was the Michigan Consumer Sentiment Index, a strong number of 81.4 reported which beat the forecast of 76.5. Strong and sustainable numbers for personal consumer confidence in economic activity are highly desirable for strong economic growth measured by GDP.

For the week of December 7– December 11, 2020, the major US stock market indexes closed as follows on Friday, December 11, 2020:

• Dow Jones Industrial Average: Close 30046.37, -0.57% for the week, +5.28% Year-to-date

• S&P 500 Index: Close 3663.46, -0.96% for the week, +13.39% Year-to-date

• Nasdaq Composite: Close 12377.87, -0.69% for the week, +37.95%, Year-to-date

• Russell 2000: Close 1911.70, +1.02% for the week, +14.58% Year-to-date

Economic events for the week December 14- December 18, 2020:

Important economic data for the week will be the weekly Initial and Continuing Jobless Claims, the Industrial Production, the Retail Sales, the Fed Interest Rate Decision, and the Building Permits and Housing Starts.

Sources:

https://www.wsj.com/market-data/stocks/us/indexes

https://www.barchart.com

https://www.fxstreet.com/economic-calendar