Markets Prepare for Start of Biden Administration

Last Updated: Wednesday, January 20, 2021 4:43 PM | Neal Farmer

It's a short week for trading as markets were closed on Monday in observance of Martin Luther King Jr. Day.

Biden's Inauguration

Stocks fell at the end of last week with the S&P 500 losing 1.1% over the last two trading days. Investors reacted to President-elect Joe Biden’s $1.9 trillion stimulus proposal that includes $1,400 checks and added unemployment benefits. The proposed bill does also includes some policies with minimal bipartisan support such as a $15 per hour federal minimum wage. Some aspects of the bill can be passed through a 50-50 Senate with Kamala Harris holding the tie-breaking vote but others will need to overcome a filibuster which requires 60 votes or for Democrats to eliminate the legislative filibuster. Due to this, the proposal is a starting point for negotiations between the parties as opposed to a finalized ready-to-pass stimulus bill.

Markets are preparing for Inauguration Day on Wednesday Jan. 20. Going forward Democrats will now have control as they will hold the White House, House of Representatives, and the Senate will be split but the tie-breaker vote will go to Vice President-elect Kamala Harris. Typically, new presidents try to get a lot of legislation passed in the first 100 days of their term, so expect the Biden Administration to try to move quickly with what it considers to be the top priorities.

Earnings Season

Earnings season kicked off last week with some of the world’s largest banks reporting better-than-expected profits and mixed revenue results. This week is also dominated by large financial institutions as Bank of America (BAC), Goldman Sachs (GS), Morgan Stanley (MS), Truist (TFC), Ally (ALLY), Discover (DFS), and others are set to report. Investors will be looking to see if these firms are also able to surpass earnings expectations just as JP Morgan (JPM), Wells Fargo (WFC), Citigroup (C), and PNC were.

Outside of banks, a few major tech companies and United Airlines (UAL) are expected to release quarterly earnings this week. Netflix (NFLX), IBM (IBM), and Intel (INTC) are some of the biggest tech giants to report as portfolio managers look to see how the vaccine and a more reopened economy has affected these firms that may have actually benefited from covid-19 at first. These three businesses have not seen strong trading recently as investors are increasingly concerned about fierce competition for Netflix and Intel in particular. Disney Plus is trying to take over market share as some hit series such as The Mandalorian have helped the service get off the ground running. Hulu, HBO, YouTube are also major competitors that are not going away anytime soon.

Intel has had major trouble recently as well with Apple moving away from the semiconductor producer in favor of its own hardware. Additionally, Advanced Micro Devices (AMD) has been taking over market share with new technology that has most tech experts recommending their products over the former king, Intel.

Lastly, United Airlines reporting will give the market a first look at how airlines performed in the last quarter during the holiday season. The industry was one of the hardest hit from the pandemic as travel was restricted and even once those quarantine measures were lifted, many remained home with the virus continuing to spread. The results should give some indication into how much travel actually increased as a result of the holidays relative to previous years.

Economic Events this Week

Wednesday

  • 7:00 a.m. - MBA Mortgage Applications Index

Thursday

  • 8:30 a.m. - Initial Claims
  • 8:30 a.m. - Continuing Claims
  • 8:30 a.m. - Housing Starts

Friday

  • 10:00 a.m. - Existing Home Sales
  • 11:00 a.m. - EIA Crude Oil Inventories

Earnings Reports this Week

Tuesday:

Before the bell: BAC, GS, HAL, STT After the bell: NFLX, JBHT

Wednesday:

Before the bell: UNH, PG, MS, USB, BK After the bell: UAL, KMI, DFS, AA

Thursday:

Before the bell: TRV, BKR, TFC, UNP After the bell: IBM, INTC, PPG, CSX, STX

Friday:

Before the bell: SLB, ALLY, RF

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