The first day of trading in 2021 turned out to be negative for the US stock market, the main reason was the continuing increase in the number of cases of COVID-19 infection in the country and in the world.
Additional pressure on the market came from the approaching second round of elections for two US Senators from Georgia, the outcome of which is to determine whether Democrats gain control of the Senate and whether Joe Biden will have the necessary support to fulfill his campaign promises. Investors largely ignored data from IHS Markit, which showed that manufacturing activity in the US in December grew at the fastest pace in more than 6 years. According to the report, the manufacturing index rose to 57.1 from 56.7 in November. The index also improved from a preliminary reading of 56.5, with a reading above 50 signaling expansion in activity. The index ended 2020 at its highest level since September 2014, with gains in December for the eighth straight month after falling to their lowest in more than 10 years in April, when the first rounds of business closures to contain COVID-19 were in full swing.
The next day the market moved to moderate growth. Market participants focused on the critical election of senators in Georgia, as well as the ISM report, which showed that the activity in the US manufacturing sector in December rose to almost a maximum in 2.5 years. Meanwhile, the decision of the UK to introduce a national quarantine against the background of a worsening epidemiological situation due to a new variant of the coronavirus had a negative impact on the mood of market participants.
On Wednesday the dynamics changed to multidirectional, as market participants watched the protests in Congress and analyzed the minutes of the Fed meeting. Investors also received several discouraging reports. Thus, the ADP report that private sector employment fell 123,000 jobs in December after a jump of 304,000 jobs in November, revised downward. The decline surprised economists, who expected employment to rise by about 88,000 jobs, up from the 307,000 jobs initially announced in the previous month. Meanwhile, the minutes of the FRS meeting, which took place on December 15-16, showed that at the December meeting, the FRS leadership discussed ways to explain plans to increase its asset portfolio worth $ 7.4 trillion. The minutes also show how central bank officials changed their economic forecasts amid news of the approval of Covid-19 vaccines, which could become widely available by the spring of 2021. Many of the meeting participants warned of a slowdown in growth in the short term due to a sharp increase in the number of infections and hospitalizations with Covid-19, but noted that congressional spending would be more effective in preventing the winter recession than changes in the Fed's policy.
On Thursday the American market moved to a noticeable growth. Market participants reacted positively to the fact that Democrats gained control of the Senate and Congress officially recognized Joe Biden as the next president of the United States. Early Thursday morning the US Congress approved the results of the November presidential election, recognizing the Democratic candidate Joe Biden as the winner, despite the forced delay due to the storming of the Capitol by supporters of the current President Donald Trump.
Investors also received the data from the Labor Department, which showed that the number of Americans who first filed for unemployment benefits fell unexpectedly last week, while remaining extremely high. According to the report, initial jobless claims totaled 787,000 seasonally for the week ending January 2, up from 790,000 in the previous week. Economists forecasted 800,000 applications.
The week ended in a green zone. Biden said he would announce a "trillions" economic package on Thursday to stimulate the economy, while incumbent US President Donald Trump for the first time recognized the outcome of the presidential election, which transferred power to the Biden administration, and condemned the violence during the storming of the Capitol building on Wednesday. Later, however, he announced that he would not be present at Joe Biden's inauguration.
