U.S. equity markets slid lower last week following several weeks of strong gains as market participants assessed an unexpected rise in weekly jobless claims amid worsening coronavirus trends and awaited further news from Congress as lawmakers work toward a consensus on additional stimulus. For the week, the S&P 500 notched a loss of -1.0% while the Nasdaq Composite and Dow Jones lost -0.7% and -0.5%, respectively. On the vaccine front, the Food & Drug Administration officially granted emergency use authorization for the Covid-19 vaccine from Pfizer and BioNTech, thereby allowing the U.S. to begin distributing and administering the vaccine this week, starting with high-risk healthcare workers. The FDA will meet again this coming Thursday to discuss emergency use authorization for Moderna’s vaccine candidate.
The recent surge in equity markets has been met with a corresponding wave in mergers & acquisitions and initial public offering (IPO) activity as companies look to take advantage of the supportive market backdrop for obtaining funding and cashing out private ownership stakes. Last week, Airbnb (ABNB) and DoorDash (DASH) joined the ranks of newly listed companies whose stock prices have risen more than 50% in their trading debuts. To date, $157 billion has been raised in IPOs in 2020, surpassing the record levels of 1999 and 2000 when over $105 billion was raised each year. The average stock price gain for IPOs on their trading debut in 2020 has also marked a record of 22%.
As coronavirus trends have continued to worsen in recent weeks and pushed more states to implement restrictions, market participants have been closely watching the economic data for signs of pressure. Last week’s unemployment claims data indicated the labor market recovery has cooled as the number of initial unemployment insurance claims rose by 137k from the week prior to 853k, the highest weekly mark since September. Despite the slowing labor market recovery, the U.S. consumer remains in good spirits per last week’s initial look at the December consumer confidence survey from the University of Michigan. The index rebounded strongly to 81.4 after dipping to 76.9 in November as consumers have grown more confident in improving economic conditions as vaccines are rolled out.
Optimism on the potential of additional near-term fiscal relief continues to ebb and flow as Congress seeks to resolve or work around its stalemate. In order to improve the prospects for a deal before year-end, a bipartisan group of Senators has split its $908 billion coronavirus relief proposal into two packages, including a larger $748 billion component focused on areas of general agreement in negotiations and a smaller $160 billion tranche featuring the more controversial issues that have left Congress at odds.
In the week ahead, in addition to vaccine and stimulus updates, market participants will be monitoring other political developments following the official vote by the Electoral College on Monday confirming Joe Biden as President Elect. On Wednesday, the Federal Reserve will be in the spotlight in the press conference following its monthly meeting where Chairman Jerome Powell will provide updated thoughts on the economic outlook and announce new policy moves (if any). Retail sales data for November, released on the same day, will provide a gauge of the strength of the U.S consumer heading into the holiday season. Meanwhile, the E.U. and U.K. have extended their negotiations into this week to strike a free trade deal as the post-Brexit transition period comes to a close this year.
