In this week’s recap: After setting new highs, market rattled by unexpected trading phenomenon
Weekly Economic Update
THE WEEK ON WALL STREET
Despite strong corporate earnings, stock prices closed lower after a volatile week of trading triggered by unprecedented activity in a handful of companies.
The Dow Jones Industrial Average lost 3.27%, while the Standard & Poor’s 500 fell 3.31%. The Nasdaq Composite index dropped 3.49% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, slipped 1.83%.1,2,3
Bull Market Takes a Breather
On Monday, the S&P 500 and NASDAQ Composite overcame early losses to post new all-time highs.4
Stocks rode a roller coaster on Wednesday, falling sharply despite above-consensus earnings results, only to come roaring back the following day. Stocks suffered another broad retreat on Friday, sending the major indices to their worst weekly performance since October.4,5
Earnings continued to surprise to the upside, with 81% of companies in the S&P 500 that reported results by last Thursday morning exceeding analysts’ expectations.6
Shorts Come Into Focus
The ability of social media to stoke passions and provide a catalyst to herd behavior made itself evident on Wall Street last week.
A chat forum became the central hub for motivating individual investors to trade certain stocks with large short positions. This unexpected buying activity roiled markets and fueled a sharp rise in their stock prices. The sudden surge higher forced some fund managers to buy stocks in these companies at higher prices, resulting in substantial losses for the firms.
It’s difficult to say whether this social media phenomenon has long-term implications, though it is likely to change how professional investors evaluate trading strategies in the future.
In order to sell short, you are required to open a margin account. Selling short is not suitable for all investors. Margin trading entails greater risk, including the risk of unlimited losses in a position and incurrence of margin interest debt. You should consider your financial situation and risk tolerance before trading on margin.
T I P O F T H E W E E K
Succession planning isn’t just about an orderly ownership transition. Waiting too long may prompt changes in insurance premiums, fees and taxes.
THE WEEK AHEAD: KEY ECONOMIC DATA
Monday: Institute for Supply Management (ISM) Manufacturing Index.
Wednesday: Automated Data Processing (ADP) Employment Report. Institute for Supply Management (ISM) Services Index.
Thursday: Jobless Claims. Factory Orders.
Friday: Employment Situation Report.
Source: Econoday, January 29, 2021
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.
THE WEEK AHEAD: COMPANIES REPORTING EARNINGS
Monday: Thermo Fisher Scientific, Inc. (TMO).
Tuesday: Amazon.com (AMZN), Alibaba Group (BABA), Alphabet, Inc. (GOOG), ExxonMobil (XOM), Pfizer (PFE), Amgen (AMGN), United Parcel Service, Inc. (UPS), Electronic Arts (EA), Emerson Electric (EMR), Chipotle Mexican Grill (CMG).
Wednesday: Abbvie (ABBV), Qualcomm (QCOM), PayPal Holdings (PYPL), GlaxoSmithKline (GSK).
Thursday: Ford Motor Company (F), Bristol Myers Squibb (BMY), Merck (MRK), Snap, Inc. (SNAP), Prudential Financial (PRU), Air Products and Chemicals, Inc. (APD), Penn National Gaming (PENN).
Friday: Regeneron Pharmaceuticals, Inc. (REGN), Illinois Tool Works, Inc. (ITW).
Source: Zacks, January 29, 2021
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.
Q U O T E O F T H E W E E K
“The person who makes a success of living is one who sees his goal steadily and aims for it unswervingly.”
CECIL B. DeMILLE
T H E W E E K L Y R I D D L E
It can certainly be measured, yet it has no length, width, or height. What is it?
LAST WEEK’S RIDDLE: A man claims he was 88 years old two days ago, and yet he also tells you that he will turn 91 next year. How can this be?
ANSWER: The man talks to you on New Year's Day (1/1), and his birthday is on December 31. So two days ago (12/30), he was 88. On 12/31, he turned 89. His 90th birthday will fall on 12/31 of this year, and he will turn 91 next year.
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. The information herein has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested.
This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such.
All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results.
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1. The Wall Street Journal, January 29, 2021
2. The Wall Street Journal, January 29, 2021
3. The Wall Street Journal, January 29, 2021
4. The Wall Street Journal, January 25, 2021
5. CNBC January 29, 2021
6. The Wall Street Journal, January, 28, 2021