Markets were mixed during an eventful second trading week of 2021 as President Trump was impeached for a second time and President-elect Biden revealed his new economic stimulus proposal.
Stocks lost ground Monday, tried to recover on Tuesday and Wednesday, and then retreated on Thursday and Friday.
Biden’s Stimulus Plan
On Thursday night President-elect Joe Biden unveiled his $1.9 trillion covid-19 relief bill. The bill, which includes a round of $1,400 stimulus checks, also calls for raising the minimum wage to $15 per hour, expand unemployment benefits, increase funding for vaccinations and testing as well as provide some tax credits to families.The additional round of checks, when combined with the $600 checks included in the last package would reach the $2,000 that President Trump and Democrats tried to include in the last bill.
While some parts of the bill can be passed through the Senate with Vice President-Elect Harris breaking a party-line tie, others would need to either overcome a filibuster, which requires 60 votes, or need the Democrats to eliminate the filibuster in order to get passed. This means that Biden's proposal is really more of a starting point for negotiations than a ready-to-pass piece of legislation.
Bank Earnings
JP Morgan (JPM), Wells Fargo (WFC) and PNC all reported fourth-quarter earnings Friday morning. Each firm beat EPS estimates with all but Wells Fargo completely crushing expectations from analysts. Even still the share prices for these companies all dropped with Citigroup and Wells Fargo falling more than 6% and 8% respectively. Citigroup and Wells Fargo took the biggest hit and not coincidentally were the only two to report worse-than-expected revenue.Wells Fargo's losses were driven the by the revenue miss and some expectations for lower expenses as the company restructures. Meanwhile, Citi's bond trading division failed to live up to expectations. Big losses from that pair was enough to push most bank stocks into the red for the day Friday.
JPMorgan in particular reported EPS of $3.79 compared to estimates for $2.65. Much of that was due to a $2.9 billion reserve release that created a net benefit of roughly $0.72 per share. Even still the reserve release speaks to the firm’s confidence in the economy as CEO Jamie Dimon said the vaccine and stimulus bills led to the company's more optimistic outlook.
Trump’s Departure
Markets are preparing for the end of the Trump Administration as the current President’s term will end on Jan. 20 at noon when President-elect Joe Biden is sworn in as the 46th President of the United States. There will only be one more full trading day under the current administration as markets will be closed on Monday to observe Martin Luther King Jr. Day.All in all, the S&P 500 lost 1.48% this week, the NASDAQ gained lost 1.54% , and the Dow Jones Industrial Average dropped 0.91%.