The Stock Market This Week: January 4-8

By: Stacey Nickens

• Earnings Reports
• Economic News
  • Total construction spending increased 0.9% in November. Private construction spending rose 1.2% m/m, while public construction spending fell 0.2%. Overall, the data suggested that the residential construction market remained strong.
  • The December IHS Markit Manufacturing PMI rose to 57.1.
  • December’s manufacturing index rose to 60.7% and showed an acceleration in manufacturing activity.
  • Factory orders rose 1% in November as businesses continued to increase spending.
  • The ADP Employment Change report for December estimated that private-sector payrolls fell by 123,000.
  • The ISM Non-Manufacturing Index for December rose to 57.2% as manufacturing expanded more rapidly than it did in November.
  • Initial claims for the week ending in January 2 remained elevated at 787,000.
  • December nonfarm payrolls fell 140,000. Analysts expected payrolls to rise 50,000-100,000. Private payrolls fell 95,000, while analysts expected payrolls to rise 128,000. The leisure and hospitality sectors as well as the government sectors saw the biggest loss in payrolls. Manufacturing payrolls increased.
  • The unemployment rate remained at 6.7%, and average hourly earnings came in above expectations.
• Major Corporate News
  • Tesla reported a record number of deliveries in Q4 of 2020.

On Monday, major indexes declined due to profit-taking measures across the market. The S&P 500 fell 1.5%. The Dow Jones lost 1.3%, and the Nasdaq declined 1.5%. The S&P 500 and Dow Jones set all-time highs at market open due Tesla reporting a record number of deliveries in Q4. However, investors wanted to take profits at the beginning of the year, driving the market down. Ten of the 11 S&P 500 sectors finished in the negative. Real estate was the day’s worst performer, while the energy sector was the only one to finish in positive territory. In economic news, total construction spending increased 0.9% in November. Private construction spending rose 1.2% m/m, while public construction spending fell 0.2%. Overall, the data suggested that the residential construction market remained strong. The December IHS Markit Manufacturing PMI rose to 57.1.

On Tuesday, a buy-the-dip mindset helped major indexes finish in positive territory. The S&P 500 rose 0.7%. The Dow Jones advanced 0.6%, and the Nasdaq gained 1%. The market also rallied around a strong ISM Manufacturing Index reading for December. December’s manufacturing index rose to 60.7% and showed an acceleration in manufacturing activity. Small-caps, cyclicals, and commodities benefited from this news. As a result, the energy, materials, and industrials sectors performed strongly during daily trading. However, market performance seemed somewhat restrained as investors waited on news of the Senate runoff elections in Georgia.

On Wednesday, small-cap and cyclical stocks outperformed on the prospect of a Democratic-controlled Senate. Investors seemed optimistic due to the possibility of more fiscal stimulus. The Dow Jones rose 1.4% by close but was up much higher during intraday trading. The index pared gains when a group of pro-Trump protesters breached Capitol Hill. The S&P 500 advanced 0.6%, while the Nasdaq fell 0.6% due to weakness among mega-cap stocks. With strength among small-cap and cyclical stocks, the financial, materials, energy, and industrial sectors performed strongly in daily trading. The information technology and communication services sectors underperformed due to the prospect of enhanced tech scrutiny under a Democratic Senate. In economic news, factory orders rose 1% in November as businesses continued to increase spending. The ADP Employment Change report for December estimated that private-sector payrolls fell by 123,000.

On Thursday, major indexes closed higher due to strength in the information technology sector. Investors bought the dip in technology from yesterday, helping the Nasdaq climb 2.6%. The S&P 500 advanced 1.5%, and the Dow Jones rose 0.7%. Information technology and consumer discretionary were the best performing sectors, but energy and financials also performed strongly. The market was additionally optimistic on strong economic news. The ISM Non-Manufacturing Index for December rose to 57.2% as manufacturing expanded more rapidly than it did in November. However, initial claims for the week ending in January 2 remained elevated at 787,000.

On Friday, major indexes posted gains with strength in the consumer discretionary and tech sectors. The S&P 500 rose 0.6%. The Dow Jones advanced 0.2%, and the Nasdaq gained 1%. Political headlines dominated the news cycle today, with a focus on potential additional stimulus as well as possible additional impeachment articles. With these headlines, value securities struggled to perform. Growth securities outperformed and bolstered the market. The economic news of the day was mixed. December nonfarm payrolls fell 140,000. Analysts expected payrolls to rise 50,000-100,000. Private payrolls fell 95,000, while analysts expected payrolls to rise 128,000. The leisure and hospitality sectors as well as the government sectors saw the biggest loss in payrolls. Manufacturing payrolls increased. Among labor market news, the unemployment rate remained at 6.7%, and average hourly earnings came in above expectations.