The S&P 500 (Index: SPX) popped to new highs in the third week of January 2021, before tailing off on Friday, 22 January 2021 to close 11.60 points below its new high mark of 3,853.07.
The news that caused the new record high came from Netflix (NASDAQ: NFLX). The company reported outstanding quarterly results and announced they had surpassed over 200 million subscribers. More significantly, with so many paying customers, the firm announced it will no longer need to borrow to finance its development of new programming. That change will boost the company's profitability going forward, with the news sending its stock price 10.6% higher because of the associated change in its future expectations. The company's market capitalization likewise surged to 0.8% of the entire value of the S&P 500, contributing a significant portion of the index' gains during the week.
Here is the latest update to the alternative futures chart.
We think investors are still mostly focusing on 2021-Q2 as they set current day stock prices, although it's possible they may have shifted some their focus toward a more distant time horizon in conjunction with Netflix' change in future expectations. We'll find out over the next two weeks how things settle out for the S&P 500, where the onset of new information will set the tune to which index dances.
Speaking of which, here are the past week's more notable market-moving headlines.
- Tuesday, 19 January 2021
- Signs and portents for the U.S. economy:
- Spend big now, pay down debt later, Biden's Treasury nominee Yellen tells lawmakers
- Yellen tells lawmakers to 'act big' on coronavirus relief
- Yellen says Biden's focus now is providing relief, not raising taxes
- Under government pressure, big U.S. lenders rush to launch more pandemic loans: sources
- Positive signs for China's economy:
- China's economy picks up speed in fourth quarter, ends 2020 in solid shape after COVID-19 shock
- China's fourth quarter GDP grows 6.5% year-on-year, beats expectations as recovery gains momentum
- China industrial output rises 7.3% year-on-year in December; retail sales miss forecast
- Bigger stimulus still developing in Eurozone:
- Euro zone pledges continued fiscal support against COVID, to work on recovery plans (reuters.com)
- ECB's latest stimulus expected to have little impact on euro zone economy - Reuters poll
- ECB minions have some questions to answer, and may already be doing yield curve control:
- Dark days are far from over: Five questions for the ECB
- The ECB Has Quietly Launched Yield Curve Control... Just Don't Call It Yield Curve Control
- Wall Street closes higher as Yellen backs more stimulus
- Wednesday, 20 January 2021
- Signs and portents for the U.S. economy:
- Oil rises on U.S. stimulus hopes, tighter market under Biden
- Analysis: Rising U.S. bond market inflation gauge masks extent of pandemic shock
- Bigger trouble developing in the Eurozone:
- Wall Street sets record as Netflix jumps, Biden inaugurated
- Thursday, 21 January 2021
- Signs and portents for the U.S. economy:
- Yellen's call to 'act big' reflects long re-think on big government debt
- Biden administration suspends federal oil and gas permitting
- U.S. labor market recovery fading; housing, factories underpin economy
- Bigger stimulus developing in the Eurozone:
- EU likely to tap markets in 'late spring' for recovery cash -Gentiloni
- EU approves German coronavirus state aid scheme
- ECB minions do nothing, but worry about new COVID infections:
- S&P, Nasdaq close at record highs on optimism about Biden stimulus plan
- Friday, 22 January 2021
- Daily signs and portents for the U.S. economy:
- Oil fall as China COVID-19 cases trigger clampdowns
- U.S. factory activity near 14-year high; home sales rise in December
- U.S. existing home sales increase; inventory tumbles to record low
- Bigger trouble developing in Japan and in the Eurozone, Germany shrinks GDP forecast:
- Euro zone business activity shrinks in January as lockdowns hit services
- German government sees 2021 GDP growth of 3%: source (this is down from their previous projection of 4.4%)
- Deflation and bigger stimulus developing in Japan:
- Japan December factory output, retails sales seen falling in blow to GDP outlook: Reuters poll
- Japan's consumer prices fall at decade-fast pace, add to deflation fears
- Analysis: As pandemic prolongs easing, BOJ warms to idea of wider band for yield target
- ECB minions not sure what they mean when promising to provide 'favourable financing':
- Dow, S&P close lower as IBM, Intel weigh, coronavirus concerns rise
Elsewhere, Barry Ritholtz outlines the positives and negatives he found in the markets and economics news of the market holiday-shortened week that was!
Update 27 January 2021 9:56 PM Eastern: Things settled out in the markets more quickly than we anticipated. According to the dividend futures-based model, today's 2.6% drop in the value of the S&P 500 directly coincides with what would be expected if investors had previously set their forward looking focus on 2021-Q4, then suddenly refocused it on the much nearer term of 2021-Q2. Here's what that looks like on a mid-week update to our alternative futures spaghetti forecast chart:
According to the news, it was the worst day for stock prices since October 2020. From our perspective, had investors reset their investment horizons on 2021-Q1 instead of 2021-Q2, the S&P 500 could have fallen another 5%, which would be a more impressive Lévy flight event than the relatively small one we saw today.
But what new information might compel investors to become so myopic?
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