Markets ended this week higher after some volatility early in the week followed by steady gains.
The S&P 500 fell a little more than 1.1% at its worst on Monday but closed down only 0.4%. Those losses were soon recovered on Tuesday which saw the index rise 1.1% and gain just over 1% for the rest of the week.
It was a pretty stable week given the major COVID-19 vaccine updates in recent weeks have had a significant impact on markets. The Pfizer (PFE) and BioNTech (BNTX) vaccine candidate received emergency use approval from the U.K. with the country ordering enough of the vaccine for 20 million people.
Stimulus Discussions
One of the major developments this week was new-found optimism about a possible stimulus deal. Discussions have been on and off for a new bill since far before the election but recent reports suggest the current package has support from both sides. The $908 billion package is much smaller than previous versions offered by the Democrats but has more support from Republican lawmakers. Nancy Pelosi and Mitch McConnell are still holding discussions and are considering attaching the stimulus to the year-end funding bill. Lawmakers have until the end of next week to agree on a spending package in order to avoid a government shutdown.Markets have so far responded positively to the stimulus updates but not overwhelmingly so. The major indices have made modest moves on stimulus headlines, but between the smaller deal and the fact that traders have been down this road before, the reactions have been muted. Democrats spent the summer and autumn months looking for a deal similar to the size of the Cares Act of around $2.2 trillion but are settling for one closer to the American Recovery Act of 2009 that was $831 billion. The bill reportedly does not include another round of $1,200 stimulus checks.
Jobs Report
The most significant data released this week came Friday when the November jobs report showed only 245,000 jobs were added last month. Analysts expected 440,000 jobs to be added. Even though fewer jobs were added than predicted, the unemployment rate fell to 6.7% compared to estimates of 6.8%. This is primarily due to a decrease in the labor-force participation rate, which dropped to 61.5%.Even more concerning is the ratio of temporary to permanent unemployment. People on temporary unemployment fell from 2.87 million to 2.61 million in November but during that same time permanent unemployment increased from 4.44 million to 4.6 million. This has been a consistent trend since the pandemic as a large majority of those returning to work were temporarily laid off early and have been steadily returning to work. Thus, permanent job losses have become an increasing portion of the unemployed.
Unemployment claims data released Thursday showed a drop in initial claims after a rise in the previous week. Last week 712,000 people filed a first-time unemployment claim, down from 787,000 the week before. Continuing claims for the week of Nov. 20 more than 500,000 to 5.52 million, beating expectations for 5.8 million. Continuing claims have been falling steadily despite initial claims staying mostly steady since early October. The millions that filed every week earlier in the pandemic are finding jobs but at a much slower rate than before.
Coronavirus
After new daily cases decreased last week, largely as a function of lower testing around Thanksgiving, cases have once again started to rise, surpassed over 200,000 daily new cases. Should cases continue to rise, investors can expect even more shutdown measures and increased negative impacts on the economy.All that being said, the S&P 500 gained 1.67%, the NASDAQ added 1.96%, and the Dow Jones Industrial Average rose 1.22%.