Second-Guessing Into the Weekend… US market action today suggests investors are thinking they may have gotten a liiitttle ahead of themselves in declaring the reign of the Reflation trade. Granted the damage done is limited in comparison to the recent gains, but rotation is firmly in reverse today as investors grapple with a few doses of reality that blur the rose-colored recovery timeline that has been coaxing markets higher. The consternation began with the long-awaited announcement last night of President-elect Biden’s “American Rescue Plan”, which includes additional $1400 individual checks and a proposal for a $15 minimum wage within its $1.9tn price tag. The details themselves came as no surprise, yet futures were lower overnight as months of stimulus “hope” were replaced by the reality of likely Republican resistance as Biden seeks to garner bipartisan approval (not to mention the reality of corporate tax hikes). Eco data and Bank earnings (more on these below), piled on as nagging reminders as to why the stimulus is necessary in the first place. The uneasiness has left defensives Real Estate and Utilities atop the sector table, while the Cyclical gang of Energy (XOM -4.3% on word of an SEC probe), Banks, and Transports fill out the bottom (but notably maintain healthy weekly gains).
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