The Federal Reserve announced on Friday evening that it will allow the nation’s big banks to resume share buybacks in the first quarter of 2021 subject to certain rules. Bank Stocks rose across the board in post-market trading with $JPM (JP Morgan) +5.3%, $GS (Goldman Sachs) +4.4%, and $WFC (Wells Fargo) +3.5%.
Going into the holiday-shortened Christmas week there will still be plenty to watch out for in markets as
i) Investors await the vote on a $900 billion coronavirus aid package;
ii) Vaccine rollout effort will widen after Moderna’s COVID-19 vaccine became the second to receive FDA approval;
iii) Monday could see some stock market volatility following Tesla’s addition the S&P 500, as index funds adjust holdings to match the benchmark’s rejig, and
iv) Brexit negotiations are in the endgame, putting a trillion dollars worth of trade at risk from tariffs and quotas.
Here’s what you need to know to start your week.
S&P 500 (US Market)
The benchmark index ($SPX) have successfully rebounded from the Bullish Reversal Hammer highlighted last week, totaling a gain of +1.80% (+65.8 points). The rally have also seen S&P500 closed the week establishing a new all time high of 3,725 level. Volatility of the index continues to pull lower, with ATR-14 now heading towards September low of 40 points per day ATR-14.
With S&P500 remains trading within a 3% trend channel range established since 10th November, the technical strength of the market remains bullish for a continuation rally towards 3,750 level in the upcoming week.
The immediate support to watch for any signs of weakness is at 3,660 level, an initial break of the trendline support.
Top 3 things to watch this week:
1. Stimulus on the way?
The U.S. Congress appears close to a vote on a $900 billion coronavirus relief package, after lawmakers reached a last-minute compromise to overcome one of the final obstacles to a deal.
Congressional leaders plan to attach the stimulus package to a $1.4 trillion bill to fund government spending through September 2021. A new government funding deadline is set to expire at midnight Sunday (0500 GMT Monday), risking a government shutdown without a vote.
The coronavirus aid package is expected to include one-off $600 checks for most Americans, enhanced unemployment benefits of $300 per week, help for states distributing coronavirus vaccines and more assistance for small businesses.
2. Tesla shakeout
Investors may see some volatility on Monday when Tesla ($TSLA) begins trading as part of the S&P 500 as index funds adjust their portfolios to match the benchmark’s shakeup.
Tesla shares have rallied almost 700% year-to-date, placing its stock market value at around $600 billion. It is the world’s most valuable auto company, despite having output that is just a fraction of rivals Toyota (NYSE:TM), Volkswagen ($VOW) and General Motors ($GM).
Some analysts say its share price is far ahead of fundamentals and there is plenty of debate on how the stock will perform from here on out.
3. Brexit deadline looming
With less than two weeks left to go before Britain exits the European Union when the transition period ends on Dec. 31 there is still no trade agreement in place, putting a trillion dollars worth of trade at risk from tariffs and quotas.
The talks are still deadlocked on two issues – the EU’s fishing rights in British waters and creating a so-called level playing field providing fair competition rules for both sides.
Both sides need to get any deal approved by their parliaments, and with the talks in their final stages, it is expected that any conclusion will most likely come before Christmas.
