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WKLY ROUND-UP Thru Feb 5th 2021; Mo’ Money!

Hello folks, the markets are showing a lot of exuberance and strength as we bounce from a bad week to a very strong one this week. How high can price action go? And do we even have a downside? Get my take on the current state of affairs in this week’s update;


• Major indexes rebounded from the previous week’s steep losses, helped by fiscal stimulus plans and vaccine optimism…The large-cap S&P 500, Nasdaq Composite, and small-cap Russell 2000 indexes all reached record highs having the best trading week since last November…The social media-coordinated “short squeeze” targeting hedge funds with short positions in GameStop and a few other companies also abated, but buyers turned their attention instead to the silver market, sending silver prices to their highest level since 2013 where prices quickly came back down to earth…the Senate passed a budget resolution moving forward legislation authorizing the full $1.9 trillion “Wrong Way” Biden had requested…the froth in the markets continues to give an assist to the Option markets with over 44 million contracts traded on any given day which is up dramatically over the past few years…
• Several of the week’s economic reports surprised on the upside…the ISM gauge of services sector activity rose to its highest level (58.7, with a reading above 50 indicating expansion) since February 2019. According to ISM data, the expansion in the services sector has now matched that in the manufacturing sector, which is less exposed to social distancing measures. Weekly jobless claims fell more than expected and reached their lowest level (779,000) since late November and on Friday, the Labor Department reported that employers had added 49,000 jobs in January, roughly in line with expectations, following the previous month’s downwardly revised decline of 227,000…
• The yield on the benchmark 10-year U.S. Treasury note continued moving higher, propelled by vaccine news, improving economic signals, and stimulus hopes…investment-grade corporate bond credit spreads—the extra yield offered over Treasuries and an inverse measure of the sector’s relative appeal—tightened as several companies reported generally reassuring fourth-quarter earnings and investors monitored fiscal stimulus developments…the yield curve is the most sharply upwardly sloped its been for years…low rates are all helping the mortgage and housing markets with a record $4.04 Trillion in home loans originated last year as the Feds continue to gobble up $40 Billion of MBS each month…currently, close to 70% of stocks pay a dividend that is higher than the 10 Year Treasury but if rates continue to rise, they could cause a reallocation of money into Treasuries from equities…
• Shares in Europe rose with global markets on hopes of a quicker economic recovery, spurred in part by hopes that the pace of coronavirus vaccinations would improve and by the prospect of more U.S. fiscal stimulus…Better-than-expected eurozone gross domestic product (GDP) data raised long-term inflation expectations, further lifting yields…The pace of COVID vaccination across Europe remained slow but have been picking up…while the number of daily COVID infections also started to fall in some countries after a month of strict lockdown measures across Europe…the ECB lowered its forecast for economic growth in 2021 to 5% from the 7.25% it predicted in November but raised its estimate of 2022 GDP growth to 7.25% from 6.25%.

Enjoy This Week’s Round-Up;

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