Ongoing positive news kept the market moving forward in early January, supported by strong manufacturing reports globally (including the U.S.), expectations for further stimulus from Washington, and oil cuts in production promised by Saudi Arabia. Although political unrest and the riots at the Capitol were disturbing to most, the market seemed barely bothered. The market in fact began a higher leg up following the official first day of earnings season for Q4 as major banks reported better than expected earnings. The latest upturn gained steam when Netflix provided a strong report and mega cap Tech stocks jumped in sympathy including Apple, Microsoft, Amazon, and Google. The market continued hitting new highs through the Presidential inauguration and as a number of new executive orders to aid the war against the Coronavirus was signed into law. The rally stalled during the last week as some market participants began going after short sellers, bidding prices up, and thus causing a squeeze. Volatility became huge for some issues, causing some brokerage houses to restrict trading activity on certain stocks. This disruption pressured the markets considerably due to concern for spill-over effects on fund managers potentially caught in the squeeze, and the possibility of greater regulations. Restrictions were soon eased, but some of the short-squeeze volatility remained. Through it all, earnings reports had been turning out considerably better than expected, which likely kept the markets from straying too far away from recent highs. The S&P 500 index wound up with a gain of 1.13%, while small cap stocks (IJR) led the parade, up 6.2%.
- steve scott