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Pre-market futures are down again to start a new trading day, after finishing the first session on the indexes Monday more than 1% in the red. We’re seeing only a fraction of that selling so far this morning, but what we’re not seeing is a quick snap-back to those all-time highs we were enjoying at the end of 2020.
It’s way to early to say the markets are expressing overt bearishness; after all, at all-time index highs some selling off is always expected. And at these elevated levels, even a 1.5% drop (like we saw on the Nasdaq, S&P and Russell 2000 yesterday) could be viewed as skimming profits. That said, there are a few things investors are warily keeping an eye on this morning:
The first thing is the big dual Senate runoff in Georgia, which could flip the federal governing body from Republican to Democrat if both GOP incumbents lose. All accounts are that the races will be tight; Georgia as a state leans Republican, but a rift in the party and momentum from the Democrats, who won the state for President-elect Joe Biden in November, should bring us a nail-biter by late tonight or, more likely, sometime Wednesday.
All that said, even with both the House and Senate potentially swinging to the left, it wouldn’t swing that far. A 6-seat lead in the lower body and a 50-50 tie in the upper (tie breakers would be made by Vice President-elect Kamala Harris) means that no sweeping socialist legislative changes will be embarked upon anytime soon. Put simply, for every Bernie Sanders and Alexandria Ocasio-Cortez caucusing with the liberals in Congress, there are Democrats like Joe Manchin and Abigail Spanberger working a solidly centrist position to counter them.
Less discussed publicly but arguably more importantly, this is Jobs Week. Tomorrow morning, we get new data from Automated Data Processing ((ADP - Free Report) on private-sector payrolls, and estimates are for a big drop-off from November to December. Expectations for around 60K new private-sector jobs would be far lower than the 307K posted a month ago, and would constitute the fourth-straight lower month. It would also only be a small fraction of those 754K private-sector jobs reported in September.
Non-farm payrolls from the U.S. Bureau of Labor Statistics aren’t expected to fare much better: only 50K are expected from the month of December, from 245K reported the previous month. December is a tough month for many big economic reads like this, however, based on lots of holiday-season noise. Even still, we were seeing jobs gains of over a million per month as recently as August. There are still roughly 10 million Americans who lost their jobs last spring who have yet to find employment this many months later.
Covid-19 cases in the U.S. dropped beneath 200K yesterday, but are still averaging 211K over the past week. More than 1500 people lost their lives to the disease just yesterday, but this was less than half of what we saw December 30th, which reached an all-time high. A slow, disorganized roll-out of the vaccine, combined with an expected spike from Americans having engaged in holiday travel, is causing many experts to expect an even higher spike in the weeks to come.
In short, the sell-off we’ve seen over the past 24 hours or so has plenty of justification. That’s not the same thing as entering a bear market. There is light at the end of the tunnel, but we may have farther to go to get there than we’d thought.
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Markets Await Georgia Runoff Elections
Pre-market futures are down again to start a new trading day, after finishing the first session on the indexes Monday more than 1% in the red. We’re seeing only a fraction of that selling so far this morning, but what we’re not seeing is a quick snap-back to those all-time highs we were enjoying at the end of 2020.
It’s way to early to say the markets are expressing overt bearishness; after all, at all-time index highs some selling off is always expected. And at these elevated levels, even a 1.5% drop (like we saw on the Nasdaq, S&P and Russell 2000 yesterday) could be viewed as skimming profits. That said, there are a few things investors are warily keeping an eye on this morning:
The first thing is the big dual Senate runoff in Georgia, which could flip the federal governing body from Republican to Democrat if both GOP incumbents lose. All accounts are that the races will be tight; Georgia as a state leans Republican, but a rift in the party and momentum from the Democrats, who won the state for President-elect Joe Biden in November, should bring us a nail-biter by late tonight or, more likely, sometime Wednesday.
All that said, even with both the House and Senate potentially swinging to the left, it wouldn’t swing that far. A 6-seat lead in the lower body and a 50-50 tie in the upper (tie breakers would be made by Vice President-elect Kamala Harris) means that no sweeping socialist legislative changes will be embarked upon anytime soon. Put simply, for every Bernie Sanders and Alexandria Ocasio-Cortez caucusing with the liberals in Congress, there are Democrats like Joe Manchin and Abigail Spanberger working a solidly centrist position to counter them.
Less discussed publicly but arguably more importantly, this is Jobs Week. Tomorrow morning, we get new data from Automated Data Processing ((ADP - Free Report) on private-sector payrolls, and estimates are for a big drop-off from November to December. Expectations for around 60K new private-sector jobs would be far lower than the 307K posted a month ago, and would constitute the fourth-straight lower month. It would also only be a small fraction of those 754K private-sector jobs reported in September.
Non-farm payrolls from the U.S. Bureau of Labor Statistics aren’t expected to fare much better: only 50K are expected from the month of December, from 245K reported the previous month. December is a tough month for many big economic reads like this, however, based on lots of holiday-season noise. Even still, we were seeing jobs gains of over a million per month as recently as August. There are still roughly 10 million Americans who lost their jobs last spring who have yet to find employment this many months later.
Covid-19 cases in the U.S. dropped beneath 200K yesterday, but are still averaging 211K over the past week. More than 1500 people lost their lives to the disease just yesterday, but this was less than half of what we saw December 30th, which reached an all-time high. A slow, disorganized roll-out of the vaccine, combined with an expected spike from Americans having engaged in holiday travel, is causing many experts to expect an even higher spike in the weeks to come.
In short, the sell-off we’ve seen over the past 24 hours or so has plenty of justification. That’s not the same thing as entering a bear market. There is light at the end of the tunnel, but we may have farther to go to get there than we’d thought.