Stocks fell Monday in the first session of 2021 after briefly rising to touch fresh record highs earlier in the session, as concerns over a post-holiday spike in virus cases compounded with uncertainty over the outcome of the Georgia Senate runoff elections.
All three major indices dropped more than 1% intraday on Monday, after the S&P 500 and Dow earlier ticked up to record intraday levels. The 30-stock index shed more than 500 points, or 1.7%, around 11:30 a.m. ET. The S&P 500 closed out December with a 3.7% one-month gain and 16% gain for 2020, capping off an extraordinary year in markets despite the backdrop of the pandemic. Bitcoin prices (BTC-USD) also extended their recent rally over the weekend, breaking above $34,000 to set a new all-time high before paring some gains
New COVID-19 cases in the U.S. hit a one-day record of nearly 300,000 over the weekend, according to data from Bloomberg and Johns Hopkins University, following an increase in travel for the holidays and a resumption of testing after a holiday pause.
“The widely anticipated post-holiday spike in cases is underway, and the seven-day average likely will hit a new record later this week,” Ian Shepherdson, chief economist for Pantheon Macroeconomics, said in a note Monday. “We’re braced for a bigger rebound than was seen in early December, before cases finally peak around the middle of the month.”
Traders have also been eyeing the early results of the Georgia Senate runoff elections, which will determine control of the Senate and the balance of power in Congress. Republicans currently maintain an only narrow majority in the chamber, or 50 seats to Democrats’ 48 seats when excluding Georgia. With strategists having largely assumed a divided government outcome for 2021, a Democratic sweep after Tuesday’s elections could spark a 10% selloff in the S&P 500, Oppenheimer strategist John Stoltzfus said Monday. Polling data from FiveThirtyEight showed both Democratic candidates with narrow leads as of Monday morning. However, Republicans have historically typically won the Senate seats in the state.
Traders are heading into the new year with a vaccine roll-out under way and more stimulus recently passed, offering hopes of a stronger recovery once inoculations allows the restrictions that have swept the country for months to ease. Still, hurdles exist to the outlook, and one of the biggest deciding factors in economic growth and rebound in profitability for many corporations will be the success of vaccine distribution as COVID-19 cases continue to spike, many strategists have said.
“The big question for the global economy over the year ahead will be how quickly populations are vaccinated, particularly among vulnerable groups like the elderly and those with underlying health conditions who make up the majority of hospitalizations,” Deutsche Bank economists including Henry Allen wrote in a note. “If the most affected groups can be vaccinated quickly, that could pave the way for a gradual easing of restrictions and a return to something closer to normality.”
“Markets are likely to be closely watching any issues with COVID-19 or the vaccine rollout, not least given the new variants that have been found in the UK and South Africa which spread more rapidly and have been found in increasing numbers of countries,” they added.
As of the weekend, the first doses of a COVID-19 vaccine had been given to more than 4 million people in the U.S., comprising over 1% of the nation’s population. However, Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, said President-elect Joe Biden’s goal of ramping up distribution to vaccinate 100 million people in his first 100 days was a “realistic goal,” according to an interview with ABC on Sunday.
11:223a.m. ET: Stocks turn lower, Dow sheds 450+ points
Here were the main moves in markets, as of 11:23 a.m. ET:
S&P 500 (^GSPC): -50.93 (-1.36%) to 3,705.14
Dow (^DJI): -478.84 (-1.56%) to 30,127.64
Nasdaq (^IXIC): -156.16 (-1.22%) to 12,731.33
Crude (CL=F): -$1.00 (-2.06%) to $47.52 a barrel
Gold (GC=F): +$48.40 (+2.55%) to $1,943.50 per ounce
10-year Treasury (^TNX): +1.4 bps to yield 0.926%
10:00 a.m. ET: U.S. construction spending slowed more than expected in November, though residential construction spending stayed strong
U.S. construction spending increased by 0.9% in November over October, the Commerce Department said Monday, following an upwardly revised rise of 1.6% in October. This came in slightly below consensus economists’ estimates for a 1.0% increase, according to Bloomberg data. Still, construction spending was up 3.8% over the same month in 2019.
A month-over-month decline in non-residential private construction weighed on overall construction spending. Residential private construction, however, led the upside, increasing by 2.7% month-over-month and 16.1% year-over-year amid strong housing market activity.
9:45 a.m. ET: U.S. manufacturing sector activity jumped to a 6-year high in December: IHS Markit
The U.S. manufacturing sector expanded at the fastest rate in six years in December, according to IHS Markit, in the latest sign of the recovery in goods-producing industries.
IHS Markit’s final manufacturing sector purchasing managers’ index rose to 57.1 in December following an earlier print of 56.5 for the month. Readings above the neutral level of 50.0 indicate expansion of a sector.
However, the sector’s ongoing expansion could be curbed as COVID-19 cases rise and new restrictions come into play in the near-term, noted Chris Williamson, chief business economist for IHS Markit.
“Producers of machinery and equipment reported sustained strong demand, suggesting companies are increasing their investment spending. Producers of inputs to other factories also fared well, as manufacturers sought to restock their warehouses,” Williamson said in a statement. “However, the survey also highlights how manufacturers are now not only facing weaker demand conditions due to the pandemic, but are also seeing COVID-19 disrupt supply chains further, causing shipping delays. These delays are limiting production capabilities as well as driving producers’ input prices sharply higher, adding to the sector’s woes.”
9:32 a.m. ET: Stocks open slightly higher
Here were the main moves in markets, as of 9:32 a.m. ET:
S&P 500 (^GSPC): +8.84 (+0.24%) to 3,764.91
Dow (^DJI): +19.97 (+0.07%) to 30,626.45
Nasdaq (^IXIC): +46.34 (+0.36%) to 12,934.60
Crude (CL=F): -$0.17 (-0.35%) to $48.35 a barrel
Gold (GC=F): +$49.30 (+2.6%) to $1,944.40 per ounce
10-year Treasury (^TNX): +4 bps to yield 0.952%
9:21 a.m. ET: Moderna raises lower end of COVID-19 vaccine manufacturing estimate, invests to deliver up to 1 billion doses in 2021
Moderna (MRNA) shares increased in early trading after the company said in a Monday morning update that its new “base-case global production estimate” is for 600 million doses of its COVID-19 vaccine in 2021, up from the 500 million it saw previously.
The company is also continuing to invest and add to its workforce to deliver up to 1 billion doses this year, it added.
Moderna anticipates 100 million doses will be available in the U.S. by the end of hte first quarter, and that 200 million total doses will be available by the end of the second. To date, 18 million doses have been supplied to the government.
8:16 a.m. ET: Google employees launch union as tensions with executives grow
More than 200 employees at Google’s parent company Alphabet (GOOG, GOOGL) joined a newly created union called Alphabet Workers Union, following growing discontent over executives’ handling of a number of events over the past several years. This marked the first major unionization effort within a Big Tech company.
Employees at Google have recently assailed Alphabet executives and management teams over military contracts, their treatment of contract workers and handling of sexual harassment allegations. In early December, the National Labor Relations Board alleged that Google had illegally fired two workers who had sought to unionize in 2019.
“Our union will work to ensure that workers know what they’re working on, and can do their work at a fair wage, without fear of abuse, retaliation or discrimination,” Google employees Parul Koul and Chewy Shaw, executive chair and vice chair of the Alphabet Workers Union, said in a New York Times op-ed on Monday.
The new union will include elected leadership and due-paying members, and will be open to all Alphabet workers and contractors.
“We’ve always worked hard to create a supportive and rewarding workplace for our workforce,” an Alphabet spokesperson told Yahoo Finance. “Of course our employees have protected labor rights that we support. But as we’ve always done, we’ll continue engaging directly with all our employees.”
7:55 a.m. ET: Oppenheimer sees 6-10% drop in S&P 500 ‘should Democrats win both seats’ in Georgia runoff elections
The Georgia Senate runoff elections pose a near-term risk to equities, and an outcome in which both Democratic challengers emerge victorious could spark a notable drop in the stock market, according to Oppenheimer strategist John Stoltzfus.
“A Democratic sweep of the two run-off elections in Georgia could cause the US equity broad market to experience a downdraft of anywhere between 6% and 10%,” Stoltzfus said in a note published Monday. “In our experience the markets prefer that Washington’s Capitol Hill have enough checks and balances in place to keep political power out of just one party’s hands.”
“It is thought by not just a few folks on Main Street as well as on Wall Street that if tomorrow’s runoff results in a sweep for the Democrats – providing them with control of the Senate as well as the House – that it would bode ill for business with the likelihood that corporate tax rates could rise substantially,” he said.
“In addition, a Democratic sweep in Georgia would likely see a boost in new government program creation and spending at a time when many voters, market participants and business leaders are concerned about the sizable level of debt that the Treasury has had to take on to provide a financial ‘bridge over troubled water’ via fiscal stimulus,” he added.
Republicans currently control 50 seats in the Senate, while Democrats control 48. This means that a Democratic victory for both seats would give the party the majority in the chamber when including Vice President-elect Kamala Harris’s ability to cast tie-breaking votes.
7:18 a.m. ET Monday: Stock futures point to a higher open
Here were the main moves in markets, as of 7:18 a.m. ET:
S&P 500 futures (ES=F): 3,765.5, up 16.75 points or 0.45%
Dow futures (YM=F): 30,642.00, up 145 points or 0.48%
Nasdaq futures (NQ=F): 12,935.25, up 49.75 points or 0.39%
Crude (CL=F): -$0.05 (-0.1%) to $48.47 a barrel
Gold (GC=F): +$41.30 (+2.18%) to $1,936.40 per ounce
10-year Treasury (^TNX): +1.6 bps, yielding 0.928%