Before The Bell - The old year will come to a close on Wall Street today, and what a 12 months it has been. In spring, we saw a collapse in equity prices resulting from the first wave of the coronavirus, a subsequent record comeback, and then additional gains to a succession of all-time highs for the key indexes. For investors, as William Shakespeare aptly penned, “All's well that ends well.” And that is where we are now. In sum, the major composites are at record highs and there is no indication that the investment party is about to end.
To be sure, today's stock market session will be a reminder that notwithstanding the strong aggregate performance on Wall Street this year--led by the tech-heavy NASDAQ--investors are not home free. On point, just moments ago, the Labor Department reported that first-time jobless filings had come in at 787,000. That uncomfortably high tally, which represented a 19,000 decline from late week's revised total of 806,000 layoffs, attests to the continuing pain endured by so many Americans due to the ravages of COVID-19. Long-term jobless claims also eased. But there remains a long way to go on this front. Next week, meantime, we will get the monthly read on jobs growth and unemployment. As to reactions to the jobless claims data, there was little and the stock market appears set to start the session on a mixed note.
Indeed, given this pandemic, the significant job losses accompanying it, the tragic death toll (which is over 340,000 at this time, in our country alone), and the uncertain months ahead, it is remarkable just how high the stock market remains. The key reason for this undaunted bullishness, in our view, is the extraordinary infusion of liquidity into the monetary system by the U.S. Federal Reserve. Of late, the market also has been underpinned by the approval of vaccines from a pair of U.S. drug makers, as well as indications new preventives from other entrants are coming.
Looking at yesterday's session on Wall Street, stocks began the penultimate trading day of 2020 with a solid gain of almost 200 points in the Dow Jones Industrial Average amid renewed vaccine optimism. That helped offset worries surrounding the further escalation in coronavirus cases nationwide. The early strength, though, was not wholly sustained, as some late profit taking reduced the final gains. All told, the Dow would add 74 points, the S&P 500 five points, and the NASDAQ 20 points.
Finally, in economic news out yesterday, pending home sales fell unexpectedly in November. However, the Chicago PMI rose surprisingly last month, climbing well above the 50.0 level (note: figures below 50.0 depict a possible contraction in activity in this area). Overall, we think the economy will press ahead very gingerly in the coming months, reflecting the myriad challenges facing this nation and the new Biden Administration.
In sum, this is the final trading day of the year and we wish to take this opportunity to thank our many loyal readers and wish them a happy and healthy new year and hopefully one with fewer challenges than 2020. – Harvey S. Katz, CFA