Stocks See Volatile Holiday Week as COVID-19, Stimulus Weigh

The stimulus package was once again in limbo after Trump's criticism

Digital Content Manager
Dec 24, 2020 at 11:45 AM
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The holiday-shortened week left little to be desired when it came to groundbreaking market events, with a new, fast-spreading strain of COVID-19 making headlines, as well as further stimulus updates. The week was immediately off to a volatile start on Monday, when news broke that a coronavirus variant was spreading through England and other European countries, leading to travel bans and restrictions. Fears mostly overshadowed news that Moderna (MRNA) had begun shipping vaccine doses across the country, with frantic rallies from the S&P 500 and Nasdaq ultimately falling short. In fact, the new virus strain weighed so heavily on sentiment that not even the passing of a much-anticipated stimulus package changed stocks, despite World Health Organization (WHO) leaders noting the authorized vaccines would likely protect against it.

Stocks took a sharp turn higher on Wednesday, however, after U.S. President Donald Trump criticized the new stimulus package, and directed lawmakers to increase direct payments to $2,000 from $600. That same day, the President also vetoed a defense bill that outlined Pentagon policy, and authorized $740 billion in spending. And while jobless claims came in better-than-expected, core durable goods and personal income data did not meet expectations. Lastly on Thursday, the benchmarks were mostly higher before House Republicans blocked Democrats' efforts to enact $2,000 payments, leaving stimulus talks in limbo and potentially delaying financial aid to struggling Americans. At last check, all three major benchmarks were headed for weekly losses ahead of Christmas.

Retail Sector Draws a Mix of Headlines

The retail sector was front and center over the past few days. Starting off on Monday, golf equipment giant Callaway (ELY) landed in the rough after receiving a downgrade from Compass Point to "neutral" from "buy."  Nike (NKE) surged on the heels of a fiscal second-quarter earnings and revenue win, however, and announced an upbeat full-year forecast. In turn, the blue-chip giant received no less than 13 price-target hikes. Walmart (WMT) also received some positive analyst attention to kick off the week -- RBC lifted its price target to $170, and upgraded the security to "outperform" from "sector perform."

Another big-box retailer making headlines was Target (TGT), after the security pulled back to a historically bullish trendline that could send it higher in the coming weeks. L Brands (LB) is also poised for future gains, if history is any indicator. On the other hand, luxury consignment retailer RealReal (REAL) was on track to snap a three-day winning streak, despite a bull note from Baird.

Quiet New Year's Week Features Jobless Claims Data

The week after Christmas will also be a short one, with investors finally getting to bid goodbye to 2020 as they look ahead to 2021 before New Year's Day. It will be a quiet one, too, with only a small handful of economic indicators to unpack, including pending home sales data, the Chicago purchasing managers index (PMI), and the last round of jobless claims data of the year. Until then, prepare for 2021 with these two worthwhile trading strategies for when times are uncertain, and get a breakdown of how to profit from short-covering rallies in the new year.

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