U.S stock indexes on Friday settled moderately higher, with the S&P 500 and Nasdaq 100 at new all-time highs and the Dow Jones Industrials at a 2-week high. An improved outlook for additional pandemic stimulus boosted stocks Friday, as did an easing of the Covid pandemic. Also, strength in energy stocks lifted the overall market as crude prices climbed to a 1-year high Friday. Stock indexes fell back from their best levels Friday on a disappointing U.S. Jan payrolls report. Optimism about additional U.S. pandemic stimulus is bullish for stocks after the Senate late Thursday voted to adopt a budget blueprint for President Biden's $1.9 trillion pandemic relief package. Stocks are seeing support from the decline in new Covid infections, which may end lockdowns and bolster the recovery. The 7-day average for new U.S. Covid infections fell to a 2-3/4 month low Thursday of 130,661. Friday's U.S. Jan unemployment report was mostly bearish for stocks. U.S. Jan nonfarm payrolls rose +49,000, weaker than expectations of +105,000. Also, Dec nonfarm payrolls were revised lower to a decline of -227,000 from the previously reported -140,000. On the positive side, the Jan unemployment rate unexpectedly fell -0.4 to a 10-month low of 6.3%, showing a stronger labor market than expectations of unchanged at 6.7%. Also, Jan average hourly earnings were +5.4% y/y unchanged from Dec and stronger than expectations of +5.0% y/y. Solid U.S. quarterly corporate earnings results are underpinning stocks. Of the 285 S&P 500 companies that have reported Q4 earnings results, 83% have beaten EPS estimates compared with 73% that beat estimates in the year-earlier quarter. Another negative for stocks was Friday's U.S. Dec consumer credit that rose +$9.734 billion, weaker than expectations of +$12.000 billion. Stocks continue to be undercut by the ongoing pandemic, which is undercutting economic growth and corporate profits. Globally, Covid infections have risen above 105.518 million, and deaths have exceeded 2.296 million. The VIX S&P 500 Volatility Index ($VIX) on Friday fell to a 1-3/4 month low of 20.86 and finished the day down -0.90 at 20.87, extending its sharp decline from last Friday's 3-month high of 37.51. The VIX is down sharply from last March's 12-1/4 year high of 85.47 and is just above the late-November 11-1/2 month low of 19.51. Big Picture U.S. Stock Market Factors: Bullish factors include (1) the beginning of Covid vaccinations in the U.S. and worldwide, (2) the Fed's extraordinarily easy monetary policy with the Fed's target interest rate near zero and its $120 per month QE program, (3) the aggressive fiscal and monetary stimulus measures being taken worldwide to battle the impact from the pandemic, (4) expectations for the Democratic-controlled Congress to pass new stimulus measures, (5) expectations for a recovery in S&P 500 earnings growth by +24% in 2021 after an expected -15% decline in 2020, and (6) extremely low bond yields in the U.S., UK, Japan, and Eurozone. Bearish factors for the U.S. stock market include (1) the uneven U.S. economic recovery as the pandemic continues, (2) ongoing fears about any systemic stress in the global financial system, (3) the possibility of ongoing U.S./Chinese trade and tech tensions despite the new Biden administration, and (5) geopolitical risks from Iran, North Korea, and Venezuela. Via Barchart.com
