Weak Friday Snaps Winning Streak

Last Updated: Tuesday, January 26, 2021 4:03 PM | Nick Dey

Stocks fell from record highs Friday, snapping the short-week’s winning streak.

Trading began a day late this week after markets observed Dr. Martin Luther King Jr. Day on Monday. Stocks rallied for the bulk of the week as markets welcomed President Joe Biden into office with optimism and responded hopefully to his $1.9 trillion economic stimulus package.

Reality set in as the week dragged on and the less optimistic short-term outlook came to the forefront Thursday following worse-than-expected jobs data, stronger covid restrictions in Europe, and greater opposition to Biden’s proposed stimulus plan than expected.

The Honeymoon Phase

Stocks traded higher from Tuesday to Thursday this week on various Biden-administration related headlines as the new President took office Wednesday.

Treasury secretary nominee Janet Yellen boosted markets Tuesday in the first installment of the Biden-centric rallies. During her hearing with the Senate Finance Committee, which unanimously approved her nomination Friday, Dr. Yellen defended Biden’s economic stimulus plan while pushing the "act big" mantra markets expected. Yellen also expressed an interest in working with the Republicans on the committee.

The tone set by Yellen in her hearing echoed throughout the week, despite the bill receiving increasing amounts of resistance from Republican lawmakers as the week went on. Republicans and Democrats are still working on a power-sharing agreement in the Senate. This will likely be among the major determining factors in how much of Biden's agenda can get through the legislature.

When Reality Comes Knocking...

However, as the week wore on with the only real tangible positive news coming from earnings rather than the government, investors began to let the pessimistic news of ever-rising covid cases and slowing economic recovery take the wheel.

This came to fruition Thursday after the weekly report on initial unemployment claims data showed 900,000 people applying for unemployment benefits for the first time. This was a welcome drop from last week’s unexpected jump to 926,000, but did little to sway confidence in a market that was expecting a stronger drop to 845,000.

From there, markets were quiet and a little gloomy on Friday, with the exception of the small-caps which rallied 1.22% after spending most of the day in the red with the other indices. There wasn’t much domestic news swaying markets, leaving bad economic data and strengthened covid-19 restrictions in European nations to push markets lower.

All said, the S&P rose 1.94% while the Nasdaq soared 4.19% and the Dow climbed 0.59%.

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