In a week that may live on in infamy, stocks remained calm and relatively unbothered by the pro-Trump mob that stormed the Capitol in an attempt to to prevent the certification of President-elect Joe Biden’s victory.
Stocks started the week, and 2021, on the wrong foot. The S&P 500 fell 1.5% Monday, but rebounded Tuesday during the Georgia runoff election as investors anticipated a Democratic sweep in the state. Stocks continued to rise right on through Thursday on the election results as the expectations for additional fiscal stimulus rose with the Democratic victory. Indices edged higher Friday, but rally slowed for a time after comments from West Virginia Senator Joe Manchin that reminded everyone that stimulus legislation still faces some obstacles.
Georgia Elections
Despite the mob of Trump supporters shocking the world in Wednesday’s takeover of Capitol Hill, the biggest driver of the stock market this week was the optimism that came from an historic election result in Georgia. This result split the Senate down the middle, giving both the Democrats and the Republicans 50 Senators, opening the door for Vice President-elect Kamala Harris to vote as a tie-breaker when needed.
The result of this drove markets higher throughout the week as investors came to expect that a narrow lead for the Democrats would bolster the economic recovery through faster economic support and a more organized approach to fighting the coronavirus. However, Democratic Senator Joe Manchin spooked investors for a time Friday saying that he doesn’t support $2,000 stimulus checks. However, markets recovered after the Senator retracted some of his stance saying he would "evaluate" proposals from the Biden administration, and perhaps, as traders remembered that some Republican Senators have said they support the checks as well.
While the Dow, S&P 500, and Nasdaq completed their comebacks, the Russell 2000 remained lower as investors quickly realized that, despite the potential support for $2,000 stimulus checks, there could still remain issues in the Senate with regards to how efficiently money gets distributed.
December Jobs
What got markets betting on further stimulus this week in the first place was news Wednesday from soon-to-be Senate Majority Leader Chuck Schumer that $2,000 checks would be one of the first priorities of the 117th Senate along with evidence that the economic recovery has slowed down.
That second point was hammered home Friday with the December jobs report, which showed the economy losing jobs for the first time in eight months. The economy lost 140,000 jobs last month, mostly in the leisure and hospitality sectors and cold weather and surging coronavirus cases forced many businesses in those industries to close. As we saw earlier in the pandemic, hourly wages rose as it was mostly low-wage workers losing jobs.
All said, the S&P 500 gained 3.35% this week, the Nasdaq added 3.97%, the Dow grew 2.89% and the Russell 2000 outperformed the lot with a rally of 7.49%, despite it’s rocky afternoon Friday.