Week of February 8, 2021

February got off to a strong start for the U.S. equity markets which saw their strongest weekly gains since last November.  The Dow rose 3.9% last week, while the S&P 500 and the tech-heavy NASDAQ advanced 4.7% and 6%, respectively.  The S&P 500 and the NASDAQ both closed at record highs last Friday.

The rise came as investors grew hopeful for a third COVID-19 vaccine to become available within weeks. Additionally, a drop in weekly US jobless claims, monthly jobs data showing the US economy added 49,000 jobs in January, and the third consecutive week of declines in US hospitalizations from COVID-19 added to the market's cautious optimism that the worst point of the pandemic could be in the past.

Last week’s strong performance was also driven by solid corporate earnings and a focus on progress toward another large round of fiscal stimulus.  Congressional Democrats took steps that would allow the Senate to vote on President Biden’s relief plan without Republican support in the Senate via a process known as budget reconciliation.

Treasury Secretary Janet Yellen yesterday said Biden’s plan could fuel strong enough economic growth to return the U.S. to full employment by next year.

Investors face another busy week of earnings reports.  Companies are now on track to show positive earnings growth of 1.7% for the 4th quarter of 2020, with 58% of the results already in.  That would allow the S&P 500 to snap out of an earnings recession, which exists when corporate profits post year-over-year declines for two or more quarters in a row.