Stocks and index ETFs pushed slightly higher on Tuesday, after a challenging week prior, with investors contemplating earnings results, potentially more fiscal stimulus, and a hastened dissemination of coronavirus vaccines.
The Dow Jones Industrial Average added as much as 0.5%, while the S&P 500 climbed 0.6%. Meanwhile the Nasdaq Composite rallied 0.8%.
Bank ETFs are still showing gains after shares of Goldman Sachs erased its own wins, trading as much as 1.5% lower before rebounding slightly, as traders took profits from the bank beating expectations for Q4 profit and revenue. The gains were thanks to a robust performance from its stock traders and investment bankers. The SPDR S&P Bank ETF (KBE) is up 0.33% Tuesday.
The first week of earnings season, which was heavily-laden with financial stocks, witnessed 88% of the S&P 500 companies that reported exceeding EPS estimates, according to Bank of America.
Investors Contemplate Further Stimulus
While the earnings cycle started out strong, financial pundits believe that investors will be focused on the 2021 projections and the potentially large fiscal stimulus that could result in more profits.
“We expect investors will look through 4Q results and focus on company commentary about the trajectory of recovery in 2021,” David Kostin, Goldman’s head of U.S. equity strategy, said in a note. “As investors look to 2021, policy remains a key driver for corporate profits.”
Janet Yellen, President-elect Joe Biden’s nominee for Treasury Secretary and a former chair of the Federal Reserve, echoed similar sentiments before the Senate Finance Committee on Tuesday, championing fiscal stimulus now, despite historically high debt for the United States.
“Neither the president-elect, nor I, propose this relief package without an appreciation for the country’s debt burden. But right now, with interest rates at historic lows, the smartest thing we can do is act big,” said Yellen in prepared remarks. “I believe the benefits will far outweigh the costs, especially if we care about helping people who have been struggling for a very long time.”
The move would be good for stocks which are “likely poised to resume upside, after ending a healthy consolidation,” according to a note from Fundstrat’s Tom Lee, based on a hastening pace of vaccinations and eventual rollover in coronavirus cases.
While there has been concern recently in the news that there is a dearth of coronavirus vaccine doses, and the vaccination process could continue for years before completion, Dr. Rochelle Walensky, Biden’s pick to lead the Centers for Disease Control and Prevention, said Sunday that she’s confident the U.S. will have sufficient vaccine doses to reach the incoming administration’s target of inoculating 100 million people in 100 days.
After dropping last week, stocks and index ETFs are hopeful for a peaceful inauguration and country-supportive economic data. Biden is scheduled to be inaugurated on Wednesday, with the National Guard in Washington amid increased security concerns after a Jan. 6 riot at the U.S. Capitol.
“In the week ahead, global economic data and U.S. earnings reports will be plentiful, but what matters is whether President Elect Biden’s Inauguration on 1/20 occurs peaceably and whether Republicans in the Senate send signals of constructive cooperation or of a 2020 replay,” BTIG chief equity and derivatives strategist Julian Emanuel said in a note to clients on Sunday.
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