E US Stock Market Weekly Review Feb. 1 – 5, 2021

A week with strong gains for the US stock market and a rebound from the previous week’s steep losses, as S&P 500, Nasdaq Composite, and Russell 2000 indexes made record highs. Small-cap stocks outperformed, and all major stock indexes turned positive on a year-to-date basis. The main catalyst was fiscal stimulus plans and vaccine optimism. In the US infection trends have started to improve and there has formed a peak in the daily infections from covid-19.

The oil prices rallied almost 10% and this may cause inflationary pressures. Initial jobless claims declined for the third consecutive week. Still, the non-farm payrolls figure was a weak number.

Last week I wrote “The answer to whether the stock market can continue to move higher at these record highs is hard to answer. Earnings can be a catalyst for a move higher if they beat estimates. But valuation is too stretched, especially for tech stocks.” With new record highs, further volatility in the stock market should be expected.

A short squeeze is nothing new to the stock market. Short selling also has a long history. The absence of major fundamental news stocks that rise too fast too high is strong evidence of stock price manipulation. And this is illegal. A lot of caution is suggested. GME stock crushed almost 81% this week.

Economic News

The ISM Manufacturing PMI was a slight miss with a figure of 58.7 compared to the consensus of 60. The Markit Services PMI figure of 58.3 beat the forecast of 57.5. The Markit PMI Composite figure of 58.7 also beat the forecast of 58. And the ISM Services PMI figure of 58.7 was also stronger than the consensus of 56.8.

The labor market continues to show mixed signs. The Continuing Jobless Claims figure of 4.592 M was better than the consensus of 4.7 M. The Initial Jobless Claims figure of 779 K was also lower than the consensus of 830 K.

The Nonfarm Payrolls figure of 49 K was a miss compared to the consensus of 50 K. The Unemployment Rate fell to 6.3%, better than the forecast of 6.7%.

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Disclosure: I have no position in any stock mentioned

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William K. 3 weeks ago Member's comment

An interesting perception there: "strong evidence of stock price manipulation " is an interesting observation, my guess is that amazingly it will not be noticed by the right parties to have anything done about it. The benefits of having highly placed friends is clarified once again. But I do tend toward the idea that all is not quite honest on Wall Street.

Stavros Georgiadis 3 weeks ago Author's comment

I totally agree