Market turns the page

01/04/21
  • Stocks end 2020 on bullish note, utilities lead, small caps lag
  • Nasdaq 100 posts best year since 2009
  • This week: Jobs report, manufacturing numbers, FOMC minutes

No matter how 2021 plays out, bulls can’t quibble about the way stocks wrapped up last year.

Last week the S&P 500 (SPX) closed the books on 2020 with its 30th up week of the year, notching records three days out of four, including new all-time intraday and closing highs on December 31:

Chart 1: S&P 500 (SPX), 10/22/20–12/31/20. S&P 500 (SPX) price chart. Final push of 2020.

Source: Power E*TRADE


The headline: Stocks open 2021 after year-ending rally.

The fine print: All things considered, it wouldn’t have been 2020 if the last week of the year had passed without a little political drama. After several days of foot-dragging, President Trump signed off on a $900 billion COVID relief bill, but reiterated his call for larger stimulus checks—a move supported by Capitol Hill Democrats, but blocked (for now) by Senate Majority leader Mitch McConnell.1

The numbers: 787,000, last week’s initial jobless claims number—smaller than expected, and the second-straight weekly decline.

The scorecard: The small-cap Russell 2000 (RUT)—the market leader in the final two months of the year—took a step back last week, but still posted the second-strongest 2020 return. The Nasdaq 100’s (NDX) 47.6% return was its best annual showing since 2009, and its sixth-strongest of all time:

US stock index performance table for week ending 12/31/20. S&P 500 (SPX), Nasdaq 100 (NDX), Russell 2000 (RUT), Dow Jones Industrial Average (DJIA).

Source (data): Power E*TRADE


Sector roundup: The strongest S&P 500 sectors last week were utilities (+3.2%), real estate (+2.6%), and consumer discretionary (+2.1%). The weakest sectors were energy (-1.1%), industrials (0.8%), and consumer staples (1.7%).

Highlight reel: Arcturus Therapeutics (ARCT) tumbled 54% to $42.36 on Tuesday, while Dermtech (DMTK) jumped 27% to $35.69 on Wednesday.

Futures action: After trading briefly above $1,900/ounce on two separate days last week, February gold (GCG1) ended Thursday at $1,895.10/ounce—its highest close since November 8. February WTI crude oil (CLG1) closed out a congested week little changed at $48.52/barrel. March US dollar index futures (DXH1) hit new contract lows every day last week, but rallied intraday on Thursday to end the week at 89.89.

Last week's biggest futures up moves: January bitcoin (BTCF1) +23.8%, March corn (ZCH1) +8.2%, January ethanol (ZKF1) +8.2%. Biggest down moves: January milk (DCF1) -7.1%, January VIX (VXF1) -3.9%, February natural gas (NGG1) -1.9%.

Coming this week

A busy week wraps up with the first jobs report of the New Year:

Monday: Markit Manufacturing PMI, Construction Spending
Tuesday: Vehicle Sales, ISM Manufacturing Index
Wednesday: Factory Orders, FOMC minutes
Thursday: Trade Deficit, Imports and Exports, ISM Non-Manufacturing Index
Friday: Employment Report, Wholesale Inventories, Consumer Credit Change

This week’s earnings include:

Monday: Cal-Maine Foods (CALM)
Tuesday: Smart Global (SGH)
Wednesday: MSC Industrial (MSM)
Thursday: WD-40 (WDFC), Walgreens Boots Alliance (WBA), Conagra Brands (CAG), Bed Bath & Beyond (BBBY), Constellation Brands (STZ), PriceSmart (PSMT), Micron Technology (MU)

 

Go to the E*TRADE market calendar for an up-to-date earnings schedule and complete list of splits, dividends, IPOs, and economic reports. The Active Trader Commentary also lists earnings announcements, IPOs, and economic report times each morning.

Market Mover Update: Last Monday’s rally fed the bullish pattern associated with the first trading day after Christmas (see "Eight days of Christmas").

New week, new month, new year:Kicking off 2021” offered some insights into how January has performed over the years, but whether it turns out to be an up month or a down month, a couple of days have stood out in the early going: The second trading day of January (tomorrow) has tended to be the most bullish day of the first week of the month (up 63% of the time), while the fifth trading day (Friday) has been the most bearish (down 52% of the time).2

 

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1 The Wall Street Journal. McConnell Blocks Vote on Bigger Stimulus Checks. 12/29/20.
2 Reflects S&P 500 (SPX) closing prices, 1960 – 2020. Supporting document available upon request.

What to read next...

12/31/20
Ready for a new year of trading? Start by checking in on how the stock market tends to perform in January.

12/30/20
Keeping track of sector momentum may help traders identify areas of the market poised to move in the upcoming year.

12/29/20
Looking at rallies similar to this year’s March–November surge may offer some insights into 2021’s dynamics.

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