Here’s what you need to know to start your week.
S&P500 (US Market)
The benchmark index ( $SPX ) kicks off the month of Feburary with a weekly gain of +5.03%, the best week of the index since November 2020. This rally not only fully recovered the correction from the initial week, but it also established a new all time high for $SPX at 3,895 level. Additionally, $SPX is now back above its 20DMA, along with the consolidated Trend Channel highlighted last week.
At the current junction, the week’s rally of $SPX have exhibited a Divergence pattern; as the daily rally of $SPX is accompanied with a exhaustion. The first signs of weakness in this rally will require a re-test of all-time high resistance turned support at 3,870.
Better-than-expected corporate results so far in the fourth quarter have driven up analysts’ expectations, and S&P 500 ( $SPX ) companies are on track to post growth for the period instead of a decline as initially expected. Upcoming U.S. reports in the week ahead include Cisco Systems ($CSCO), Twitter ($TWTR), General Motors ($GM), Pepsi ($PEP), Coca-Cola ($KO), AstraZeneca ($AZN) and Walt Disney ($DIS).
Upbeat along with stimulus talks and progress on the vaccine rollout boosted equities last week, with the S&P 500 and the Nasdaq recording their largest weekly percentage gains since the U.S. elections in early November.
Upbeat fourth-quarter results would bolster expectations for a strong rebound in in 2021 and help to ease investor worries that valuations are overstretched.
U.S. President Joe Biden’s push for his $1.9 trillion COVID-19 relief package gained momentum on Friday after the U.S. Senate narrowly approved a budget blueprint allowing Democrats to push the legislation through Congress in coming weeks with or without Republican support.
Republicans have proposed a $600 billion aid package, less than a third the size of the Democratic plan.
Congressional committees are set to start drawing up legislation this week and Speaker Nancy Pelosi has predicted the final legislation could pass Congress before March 15, when special unemployment benefits that were added during the pandemic expire.
Data on Friday showing a smaller-than-expected rebound in the U.S. labor market in January underscored the need for more stimulus to bolster the economy.
Market watchers will be paying close attention to Wednesday’s CPI data amid growing expectations that an uptick in could be larger and longer lasting than the is currently anticipating.
U.S. Treasury investors are betting on rising as the U.S. economy returns to more normal levels in the second half of this year, after contracting at its deepest pace since World War Two in 2020.
The prospect of a new coronavirus relief package is adding to expectations.
Meanwhile, Fed Chair Jerome Powell is to speak about the labor market on Wednesday at a webinar hosted by the Economic Club of New York. Thursday’s figures on initial jobless claims will also be in focus.