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Top 5 Things to Watch in Markets in the Week Ahead

Published 10/01/2021, 12:40
Updated 10/01/2021, 12:41
© Reuters

By Noreen Burke

Investing.com -- Politics will continue to dominate the headlines in the week ahead amid calls for President Donald Trump’s removal from office after he encouraged a mob of his supporters to storm the U.S. Capitol.

But investors will likely be focusing more on the prospects for a bigger stimulus package after Friday’s employment report showed the U.S. economy shed jobs for the first time in eight months in December amid a resurgence of Covid-19 infections. Concerns that the vaccine rollout is going too slowly could give stock markets pause.

Market participants will get a snapshot of how the economy is performing with the release of data on inflation and retail sales. Investors will also get to hear from several Federal Reserve speakers, including Chair Jerome Powell. And earnings season will get underway with big banks set to release fourth quarter earnings results on Friday. Here’s what you need to know to start your week.

  1. Political developments

Democratic-led efforts to impeach Trump for a second time gained momentum over the weekend, but it remained unclear whether enough Republicans would support the move so close to the end of his term.

Meanwhile, CNN reported late Saturday that Vice President Mike Pence had still not ruled out invoking the 25th Amendment, which allows for stripping the powers from a president unable to fulfill the duties of the office.

If found guilty after leaving office, Trump would still lose benefits enjoyed by ex-presidents, such as security and pension, and he would be barred from running for a second term. But a Senate conviction requires a two-third majority, which would take at least 17 Republican votes.

Since losing the Nov. 3 election, Trump has falsely claimed he was the victim of widespread fraud.

  1. Stimulus hopes

Last week’s results of the Georgia Senate runoffs mean that Democrats will now have a majority in both the Senate and the House. That gives investors more clarity on fiscal policies that will likely be advanced in 2021, namely, President-elect Joe Biden’s proposals for increased fiscal stimulus and higher taxes.

Stocks closed at record highs on Friday, despite data showing the U.S. economy suffered its first net loss of jobs in eight months in December, after Biden said his economic relief package will be in the trillions of dollars.

Biden said his administration's economic package will also include unemployment insurance and rent forbearance. The package is due to be unveiled on Thursday.

Larger amounts of stimulus are expected to cushion the impact of the surging virus on the economy. The U.S. reported over 4,000 deaths from Covid-19 in one day for the first time on Friday.

  1. Economic data, Fed speakers

The U.S. is due to release data on consumer price inflation on Wednesday, while retail sales figures for December are due out on Friday. Inflation is expected to tick slightly higher, but remain subdued, while retail sales are expected to have been dampened by the surging virus.

Fed Chair Jerome Powell is to speak on Thursday. The U.S. central bank has indicated that interest rates will remain on hold near zero through at least 2023 and said the path of the economy will depend significantly on the course of the virus.

Other Fed speakers making appearances during the week include Atlanta Fed President Raphael Bostic, Cleveland Fed President Loretta Mester, Boston Fed President Eric Rosengren, Fed Governor Lael Brainard, Philadelphia Fed President Patrick Harker and Fed Vice Chairman Richard Clarinda.

  1. Banks kick off earnings

Big banks will kick off the U.S. corporate earnings season in earnest with JPMorgan (NYSE:JPM), Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC) posting fourth-quarter results on Friday - the first S&P 500 companies to report for the last quarter of coronavirus-stricken 2020.

Some investors expect company earnings and economic data to play a greater role in moving stock prices this year.

For most of 2020, "you had a market that really didn't care if a company missed earnings or met earnings. All it cared about was stimulus and vaccines," said Robert Almeida, portfolio manager and global investment strategist at MFS Investment Management.

Now, "the market will be forced to reorient its attention on micro versus macro," he said.

  1. Vaccine rollout

U.S. health officials are trying to speed up the slow pace of Covid-19 vaccinations, after the coronavirus claimed over 4,000 American lives on Friday and employment data showed the pandemic further stifling the job market.

As of Thursday, roughly 6 million people across the U.S. had received a first dose of the two-shot vaccines, accounting for less than one-third of more than 21 million doses shipped to date, according to the U.S. Centers for Disease Control and Prevention.

That number falls far short of the 20 million vaccinations the U.S. government had vowed to administer by the end of 2020 as the pandemic raged largely unchecked with ever-increasing record numbers of infections, hospitalizations and deaths.

--Reuters contributed to this report

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