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Stocks Gain on Vaccine News, Jobs Report

Weekly Update – February 05, 2021

  • The S&P 500 index rose 4.65% last week, wiping out the previous week’s decline and putting the market benchmark back in record-high territory.
  • 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.
  • The S&P 500 ended the week at 3,886.83, up from last Friday’s closing level of 3,714.24 and marking its highest closing level ever. The index also recorded a new record intraday high Friday at 3,894.56. It is now up 3.5% for the year to date.
  • This comes just one week after the index had tumbled into the red for 2021 as erratic trading in stocks including GameStop (GME) and AMC Entertainment (AMC) stirred up worries about market stability and possible manipulation while new variants of COVID-19 and stumbles with vaccine distributions also weighed.
  • However, investors were encouraged this week by a return to fundamentals for much of the market. While shares of GameStop and AMC posted weekly declines of 80% and 48%, respectively, the drops put them closer to where the stocks were trading before last week’s social media-driven frenzy.
  • Investors also were encouraged by jobs data showing the US resumed hiring in January with the addition of 49,000 jobs while the unemployment rate fell to 6.3% in January from 6.7% in December.
  • Meanwhile, Johnson & Johnson (JNJ) said its Janssen Biotech unit submitted an application to the US Food & Drug Administration seeking an Emergency Use Authorization for its single-dose COVID-19 vaccine candidate. The move could result in a third vaccine becoming available for COVID-19 within weeks.
  • Amid the improved sentiment, all of the S&P 500’s sectors rose this week, led by an 8.4% jump in energy, a 6.7% climb in communication services, and a 6.7% advance in financials.
  • The energy sector’s advance came as crude oil futures also jumped. The sector’s gainers included Exxon Mobil (XOM) even as the oil major reported a plunge in fourth-quarter revenue and earnings. While its revenue missed analysts’ mean estimate, earnings excluding certain items beat the Street view by a penny. The company’s shares rose 11.5% on the week.
  • In the financial sector, shares of Chubb (CB) climbed 11.6% this week after the Swiss property and casualty insurer reported core Q4 net income up from a year earlier and well above the Capital IQ consensus estimate.
  • In communication services, shares of Alphabet (GOOGL, GOOG) jumped 14.3% as the parent of Google reported Q4 earnings per share and revenue above analysts’ expectations. The stock hit a fresh record.
  • Next week’s earnings schedule includes reports from Hasbro (HAS) on Monday, Coca-Cola (KO) and General Motors (GM) on Wednesday and Kraft Heinz and Walt Disney (DIS) on Thursday.
  • Economic data due for release next week include the January consumer price index on Wednesday, weekly jobless claims on Thursday, and preliminary February consumer sentiment on Friday.

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