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Strong day for stocks as Yellen boosts hopes for stimulus

  • It was a strong day for the US stock markets. The S&P 500 gained 0.8% and failed to close above the 3,800 point level.
  • Markets seemed to like the tone of US Treasury candidate Janet Yellen’s remarks about the stimulus.

It was a strong day for the US stock markets. The S&P 500 closed 0.8% higher and just couldn’t close above the 3,800 level. Meanwhile, the Dow ended the session 0.4% higher, the Nasdaq 1.5% higher and the Russell 2000 1.3% higher.

Yellen reinforces hopes of stimulus and inflation

To the markets They seemed to like the tone of the comments of the candidate for Secretary of the Treasury of the United States, Janet Yellen, who used his confirmation hearing in front of the Senate Finance Committee to bolster the scenario for additional fiscal stimulus under the incoming Biden administration.

Inflation expectations rose and real US yields fell on Tuesday, indicating that markets 1) expect all of the incoming stimulus advocated by Yellen to drive inflation and 2) do not expect additional debt issuance to fund the Biden administration’s stimulus to trigger a tightening of US financial conditions, likely given continued support (through asset purchases and low rates from the Fed).

This is of course a bullish combination for stocks. Higher inflation is generally positive for stock prices. Firms can raise prices, which increases nominal earnings (although the purchasing power of these earnings would not change), thereby raising the price of shares (which is also nominal). In the meantime, of course, continued favorable financing conditions are also driving share prices.

Netflix

Earnings from Netflix. Earnings per share did not meet expectations of $ 1.19 versus expectations of $ 1.38 per share. However, revenue was a bit better than expected at $ 6.64 billion for the quarter. The most important thing is that in the fourth quarter, the number of paid streaming accounts increased by 8.51 million, well above expectations from an increase of just over 6 million. Netflix shares rose as much as 11% in the post-market period.

Banks underperform despite strong earnings

Bank of America and Goldman Sachs reported earnings ahead of market opening on Tuesday. Both beat expectations for earnings per share, with the latter doubling earnings amid strong trading performance and an increase in IPO underwriting fees. However, BoA fell 0.8% on the day and Goldman fell 2.3%.

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