Tesla Leads a New Year Breakout With Stock Investors Eager for Stimulus and Earnings Season

Tesla led stocks into new record territory last week as investors focus on the potential positives coming in 2021.

The S&P 500 rose 1.8 percent between Thursday, December 31, and Friday, January 8. It was the biggest weekly gain since late November. planting the index above 3,800 for the first time ever. The Nasdaq-100, Russell 2000 and Dow Jones Industrial Average also hit new records.

The electric-car giant flew higher after reporting strong deliveries and Democrats cemented control of Washington. It’s now the fifth most valuable member of the S&P 500, shooting past Facebook (FB) — just three weeks after joining the index. The political situation also increases the odds of $2,000 stimulus checks and more infrastructure spending.

S&P 500, daily chart, showing support at trendline.

Earnings season will be the next major story with major banks like JPMorgan Chase (JPM) and Citi (C) reporting on Friday. This week also features big health-care and technology conferences.

Biggest Gainers in the S&P 500 Last Week
L Brands (LB) +26%
Albemarle (ALB) +25%
Tesla (TSLA) +25%
TechnipFMC (FTI) +24%
Flir Systems (FLIR) +20%

Oil Over $50

Last week saw at least two major levels broken. Crude oil futures (@CL) rose above $50 and 10-year Treasury yields rose above 1 percent. Both were stuck below those points since the pandemic crushed sentiment in March. Higher readings for both signal a potential “return to normal” and suggest the economy is returning to normal.

The Institute for Supply Management’s manufacturing index also shot to its highest level since August 2018 thanks to strong orders. Jobless claims were also lower than feared and service-sector data was strong. Those helped investors look past payroll numbers depressed by lockdowns.

Bitcoin Breaks $40,000

Bitcoin remained one of the strongest performers last week, shooting above $40,000 for the first time. Cryptocurrencies also achieved a combined market capitalization over $1 trillion for the first time ever.

Solar energy stocks were the single best-performing industry group last week, boosted by Democrat wins. Industrial metals have also surged as prices rise and the market looks for infrastructure spending. Banks had their best week in two months, boosted by higher interest rates.

Safe-havens like gold miners, real-estate investment trusts and utilities fared the worst. Homebuilders struggled with rising rates.

Conferences and Earnings

This week begins with two important conferences that run from today through Thursday: the J.P. Morgan 39th Annual Healthcare Conference and the Consumer Electronics Show. Several Federal Reserve officials, including Lael Brainard, Richard Clarida, Patrick Harker and Robert Kaplan will speak.

Biggest Decliners the S&P 500 Last Week
Alexandria R.E. Equities (ARE) -6.9%
Coca Cola (KO) -6.9%
Atmos Energy (ATO) -6.5%
Verisign (VRSN) -6.5%
Western Digital (WDC) -6.5%

Wednesday features crude oil inventories and the Fed’s Beige Book report on economic conditions. Initial jobless claims are the next day.

Friday morning is the busiest period, with earnings from JPMorgan Chase (JPM), Citi (C) and Wells Fargo. It also has a December’s retail sales report and January’s consumer sentiment survey. Those will give views of the consumer looking backward and forward.

This article was written by David Russell, TradeStation Securities, Inc., part of the Monex Group Inc, published on 11/01/2021.

David Russell
David Russell is VP of Market Intelligence at TradeStation Group. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.

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