Stocks Begin 2021 on a Sour Note…..

U.S. stocks stumbled out of the gates for 2021, as early gains quickly gave way to losses, with major U.S. indices closing lower in the first trading session of the new year. Much of the negative sentiment on the day appeared to be fostered by worsening COVID-19 trends, as the rise in new cases of the virus as well as the sluggish vaccine rollout stoked the virus concerns. U.S. political uncertainty also added a layer of trepidation to the markets, as tomorrow’s Georgia Senate runoff results could potentially have meaningful impacts on future legislation. These worries mostly overshadowed an early-morning boost provided by upbeat global December manufacturing reports. In other economic news, construction spending rose at a smaller amount than anticipated. Tesla posted upbeat Q4 deliveries, while M&A news poured in, headlined by Teledyne Technologies’ agreement to acquire fellow sensor technology company FLIR Systems in a transaction valued at about $8.0 billion. Treasury yields were mixed, while the U.S. dollar remained near multi-year lows. Crude oil prices turned lower and gold rallied. Asia finished mostly higher, but Japan lagged, and Europe gained ground.

The Dow Jones Industrial Average fell 383 points (1.3%) to 30,224, the S&P 500 Index was down 55 points (1.5%) at 3,701, while the Nasdaq Composite decreased 190 points (1.5%) to 12,698. In heavy volume, 1.2 billion shares were traded on the NYSE and 6.4 billion shares changed hands on the Nasdaq. WTI crude oil was $0.90 lower at $47.62 per barrel. Elsewhere, the Bloomberg gold spot price rallied $44.24 to $1,942.91 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was little changed at 89.93.

December manufacturing activity read surprisingly revised higher to kick off the New Year…..

The final December Markit U.S. Manufacturing PMI Index was unexpectedly revised higher to 57.1 from the preliminary level of 56.5, above the Bloomberg forecast of a slight downward adjustment to 56.3 and November’s 56.7 level. A reading above 50 denotes expansion and this was the highest level since September 2014 amid further substantial increases in output and new orders. However, Markit noted that supply chain disruptions were the most severe on record and the industry saw the sharpest rise in cost burdens since April 2018. The release is independent and differs from the Institute for Supply Management’s (ISM) report, as it has less historic value and Markit weights its index components differently, while it surveys a wider range of companies.

Construction spending rose 0.9% month-over-month (m/m) in November, versus projections of a 1.0% gain, and following October’s upwardly-revised 1.6% increase. Residential spending rose 2.6% m/m but non-residential spending declined 0.6%.

Treasuries were mixed, as the yield on the 2-year note ticked 1 basis point lower to 0.12%, the yield on the 10-year was little changed at 0.91%, and the yield on the 30-year bond added 1 bp to 1.65%.

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