By Barbara Kollmeyer
As the first full trading week of 2021 winds down, investors have pulled off no mean feat, driving stocks higher amid a deadly riot at the U.S. Capitol and the relentless COVID-19 pandemic.
One bright note for some is a new political dawn in the White House, with Democrats set to take control of both the House and Senate. That is albeit a thin margin, perhaps giving President-elect Joe Biden less power to spook markets with tax ambitions.
Helping fuel Friday’s gains is a report that Biden is considering a two-prong COVID-19 stimulus plan — $1,400 payments to Americans, adding to the $600 already agreed, followed by a $3 trillion tax and infrastructure plan.
That brings us to our call of the day , from JonesTrading’s chief market strategist Mike O’Rourke, who warns we may have reached a tipping point for all that investor enthusiasm.
“The expectation of $2,000 stimulus checks as part of an additional $1 trillion fiscal stimulus from the Biden administration has only fueled the incredibly exuberant animal spirits in the financial markets. Don’t be surprised if this latest (and what should be the last) bout of fiscal stimulus marks the peak of this bubble,” O’Rourke said in a note to clients.
“These developments are responsible for sending U.S. equities to new all-time highs the past couple of days including a 6% rally in the Russell 2000 /zigman2/quotes/210598147/delayed RUT +2.11% . Fears about the printing and spending have sent bitcoin 17% higher over the past two days,” he added.
Bitcoin /zigman2/quotes/31322028/realtime BTCUSD -1.26% on Friday moved above $41,00 and Thursday’s record . Those gains come as the dollar /zigman2/quotes/210598269/delayed DXY +0.39% has also climbed, meaning cryptocurrency investors may not be protecting themselves from a dollar drop, said O’Rourke. They are “simply paying twice as much for an ‘asset’ than they were at Thanksgiving,” he said.
And Bank of America’s chief investment strategist Michael Hartnett told clients in a note on Friday to “sell the vaccine” news. That is as he noted “violent inflationary price action” over the last two months for assets like bitcoin.
Bubble warnings have also been heard this week from Jeremy Grantham, co-founder and chief investment strategist at Boston-based money manager Grantham, Mayo, Van Otterloo & Co.
But some have been going the other way. Credit Suisse’s U.S. equity strategist Jonathan Golub lifted his S&P 500 /zigman2/quotes/210599714/realtime SPX +1.95% year-end target to 4,200, from 4,050, partly on hopes for a stronger economic reopening as Democrats gain power in Washington.
Stocks /zigman2/quotes/210598065/realtime DJIA +1.85% /zigman2/quotes/210599714/realtime SPX +1.95% /zigman2/quotes/210598365/realtime COMP +1.55% are rising, a day after the Dow industrials /zigman2/quotes/210598065/realtime DJIA +1.85% closed above 31,000 . European stocks /zigman2/quotes/210599654/delayed XX:SXXP -0.78% are mostly up, and Asian markets had a mixed day .
Data showed the U.S. lost 140,000 jobs in Decembe r, the first decline in eight months as the COVID-19 pandemic bore down on the economy. The jobless rate was unchanged at 6.7%.
The U.S. has suffered 4,000 new COVID-19 deaths in a single day for the first time . Meanwhile, the COVID-19 vaccine from U.S. drug company Pfizer /zigman2/quotes/202877789/composite PFE +0.56% and its German partner BioNTech /zigman2/quotes/214419716/composite BNTX +1.10% appears to protect against the new highly contagious U.K. and South African variants, says new research. And the European Medicines Agency says there is an extra dose in the BioNTech–Pfizer vaccine vials.
Amid calls for his ouster, President Donald Trump condemned Wednesday’s violence by a mob of his supporters, as he returned to Twitter /zigman2/quotes/203180645/composite TWTR +0.30% for the first time since a 12-hour ban. The violence has left five people dead, including a U.S. Capitol Police officer , and that department’s chief has now resigned. Meanwhile, education secretary Betsy DeVos became the second member of the Trump administration to quit in the wake of the riots .
Shares of Hyundai Motor /zigman2/quotes/206684590/delayed KR:005380 0.00% surged 20% in Seoul after the South Korean automobile maker confirmed talks with technology giant Apple /zigman2/quotes/202934861/composite AAPL +1.07% to create a self-driving electric car . The Korean Kospi /zigman2/quotes/210598069/delayed KR:180721 -0.57% gained nearly 4%. One analyst says Apple could reach deals with other partners , even electric-car maker Tesla /zigman2/quotes/203558040/composite TSLA -3.78% .
Shares of Micron /zigman2/quotes/205710729/composite MU +5.45% are rising after the memory-chip maker’s earnings confirmed the industry has turned a corner.
Chinese officials have locked down the capital of North China’s Hebei province, a city of 11 million, in a bid to stop a fresh COVID-19 outbreak .
2020 competes with 2016 for warmest year ever .
Identical twins aren’t so identical after all.
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