Markets Post Big Gains; Biden Signs COVID-19 Relief Package

Friday, March 12, 2021 4:46 PM | Neal Farmer

Markets had a strong week this week. The S&P 500 gained 2.6%. Equities had a rough start Monday but rallied Tuesday.

President Biden’s $1.9 trillion stimulus bill was passed in the Senate over the weekend and eventually was signed by the President Thursday afternoon. While most of the market had a good week, tech stocks continued to struggle parts of the week, but ended up posting solid gains on the back of big rallies on Tuesday and Thursday.

Stimulus

President Biden’s Covid relief package finally made its way to his desk this week after passing in the Senate over the weekend. The House reapproved the bill on Wednesday and it was quickly was signed by Biden the next day. The bill will send another round of stimulus checks to Americans. Individuals who earned less than $75,000 and couples making less than $150,000 are eligible for this round of $1,400 checks. Households will also receive an extra $1,400 for each dependent child they claim on their tax return.

Additionally, the American Rescue Plan will also extend boosted unemployment benefits with the extra $300 a week remaining in effect until September 6. A significant portion of the bill will also go to funding local governments, vaccine distributions, and small businesses. The third major stimulus package to be passed since the pandemic raised concerns for some about increased inflation but officials were quick to fight back against those concerns.

Inflation

Treasury Secretary and former Fed Chair Janet Yellen reassured investors on Monday that inflation concerns are overblown given the state of the economy. The unemployment rate remains above 6% and the real rate likely sits near 10% when considering those who have left the labor market and are working less than they would prefer to according to Fed Chair Jerome Powell . The economy has still lost millions of jobs from before the pandemic and the recovery has slowed significantly as some quarantine measures remain in place. Continued vaccine distribution will help fast forward to a new normal but inflation has not risen significantly yet.

The 5-year forward inflation expectation rate remains at 2% and is below where it was in 2018. The core Consumer Price Index (CPI) rose 0.1% in February while the core Producer Price Index gained 0.2%. Those numbers were both below analysts expectations. Not exactly rapid inflation.

Remote vs Return to Work

As vaccines are distributed throughout the world and new coronavirus cases fall, investors are betting once again on return-to-work stocks. The tech stocks that outperformed the market in response to COVID-19 are now struggling while unloved sectors such as Financial Services and Industrials are recovering losses from early last year. With more stimulus and a recovering economy that is continuing to reopen, the companies hit hardest by the pandemic will look to bounce back the strongest. Automobiles, airlines, cruises, and energy stocks have been on the rise as optimism grows around the economy.

Power to the Players

Finally, GameStop (GME) had another crazy week with the stock gaining 92.7% as Reddit is still rallying around the video-game retailer. GME briefly traded over $340 a share on Wednesday before crashing below $200 in a matter of minutes. The stock then stabilized around $260 where it mostly traded for the remainder of the week.

All said the S&P 500 gained 2.64%, the Dow Jones Industrial Average rose 4.07%, and the NASDAQ added 3.09%.

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