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Top 5 Things To Watch In The Stock Market This Week

U.S. Stock Futures Trading Higher

The U.S. stock futures moved higher in overnight trading on Sunday as the stock market points to a rebound after a losing week. The global markets from the Asia Pacific and Europe are also starting on a strong note. This came after the increasing chance of a U.S. fiscal stimulus and monetary stimulus. In addition, the positive progress on coronavirus vaccines also cheered market sentiment. This is due to the first shipments of vaccines rolling out across the U.S. The aim is to inoculate more than 100 million people by the end of March.

The vaccine “is giving markets the ability to look past the valley,” Andy Kapyrin, partner and director of research at Regentatlantic Capital LLC, said on Bloomberg TV. “Stocks pose a reasonable value proposition” relative to bonds, he said.

The major future indexes are all trading in the positive territory. The Dow, S&P 500, and Nasdaq 100 futures were all in positive territory, moving 0.66 %, 0.56%, and 0.39% higher respectively as of 4.58 a.m. ET. Last week, stocks experienced their first down week in several as legislators continued a standoff surrounding the coronavirus pandemic package. 

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Fed Kicks Off Its Two-Day Policy Meeting On Tuesday 

The Federal Reserve heads into its meeting this week with a teetering economy that could be in further danger, if no further stimulus is being approved by the Congress. This will be the last policy meeting of 2020. Investors can expect the Fed to provide fresh guidance on its continued asset purchases program. Many investors will be watching the policy closely. It would not be surprising if some investors are looking to adjust their portfolio allocation depending on the decisions by the Fed.  

“Though positive news on the vaccine front has likely brightened the medium-term outlook for the Fed, near-term uncertainty on the trajectory of the virus and the fiscal outlook should result in a still-cautious tone to the FOMC meeting statement and Chair [Jerome] Powell’s presser,” Matthew Luzzetti, chief U.S. economist for Deutsche Bank

Retail Numbers Are In Store 

On Wednesday, the U.S. Commerce Department expects to release the November retail sales report. This will not only offer a look at how consumers have been spending. But it also provides a snapshot for investors to have a better grasp of how the economy is performing. Of course, recent data on Black Friday and Cyber Monday spending was exceptional with the surge in online spending. Nevertheless, economists still expect retail sales to turn negative last month.

“High-frequency data on credit and debit card spending suggest continued recovery of spending on goods during the holiday period, albeit at a more modest pace relative to the summer,” Nomura economist Lewis Alexander said in a note Friday. “However, due to the impact of tighter pandemic restrictions on food services and a sharp decline in auto sales, we expect a 0.4% month-over-month decline in total retail sales in November.”

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Tesla Joins S&P 500 This Friday

The day is finally arriving for the world’s largest EV manufacturer Tesla (TSLA Stock Report) to become part of the S&P 500 this week. Tesla will replace Apartment Investment and Management Company (AIV Stock Report). Tesla’s entry into the S&P 500 could be anything but a quiet ride. You see, many investors are expecting that Tesla’s inclusion is likely to put downward pressure on other stocks in the index temporarily. 

“Because the market cap is so enormous and the amount of dollars that are going to be needed to buy for the index people is so large, there’s a lot of stock for sale in the other 499 names of the S&P,” said Peter Boockvar, chief investment strategist at Bleakley Advisory Group.

The inclusion of Tesla will induce a large rebalancing in the S&P 500. Many institutions will have to buy them. Therefore, investors could expect a heavy buying interest as we draw closer to December 18. Tesla stock is already up nearly 50% since its inclusion in the S&P was announced on November 16. I guess the question here is, can we expect another rally this week in the run up to the inclusion? You tell me.

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Earnings Winding Down

Earnings for software companies have seen them crushing analysts’ estimates. Recall that we saw strong reports from major retailers and software providers in recent weeks. As we continue to wind down the earnings season, there are still some big names reporting their results this week. These include Nike (NKE Stock Report), Accenture (ACN Stock Report), FedEx Corp. (FDX Stock Report), and General Mills (GIS Stock Report). As such, if you are looking for the best stocks to buy ahead of a vaccine roll-out, awaiting fiscal stimulus from Congress, or to follow earnings reports, there is enough to keep you busy this week. 

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