Normal service was resumed, as equity markets rebounded after posting mixed results in the previous week. The S&P 500 ended the week up 2.3% as extraordinarily high volumes, from retail traders in particular, piled into unloved value stocks that many expect to outperform as the real economy recovers next year.
The Dow Jones Industrial average reached a significant milestone as it closed above the 30,000 level for the first time on record this week—its ninth new record high this year.
Stocks continue to be buoyed by positive vaccine news, solid earnings and diminishing political uncertainty. Despite this more positive backdrop, current high valuations and short-term virus issues could mute any major upward movements over the coming weeks as investors continue to balance optimism and uncertainty.
Reopening hopes boosted cyclical shares, particularly energy stocks, while health care, utilities, consumer staples, and real estate shares lagged.
The U.S Dollar nursed losses again this week. Vaccine progress and expectations for a fiscal boost from a new U.S. government continue to push investors away from the greenback towards riskier assets.
0.84%US 10Y TREASURY YIELD
No major change in the yield landscape over the week. Investors sought to take on more risk amid increasing political certainty and coronavirus vaccine developments pushing yields up ever so slightly.
U.S. crude oil climbed for the fourth week in a row, briefly rising above $46 per barrel on Wednesday to the highest level in more than eight months. An unexpectedly large drop in U.S. crude supplies helping fuel the latest price rise.
This week saw the first back-to-back increase in U.S weekly unemployment benefits since July, hinting once again that the economic recovery continues to lose momentum in the absence of a renewed fiscal stimulus package.
The U.S. is now facing renewed lockdown measures with the absence of the necessary fiscal stimulus to support those most vulnerable; businesses and individuals still reeling from the original lockdown protocols. The economy will be challenged to avoid relapsing into contraction while waiting for the broad distribution of a coronavirus vaccine.
The week ahead will see focus turn to the November jobs report as market participants search for evidence indicating whether there is enough residual economic momentum to bridge the gap.