Stocks rose Tuesday as the three major indexes steadied following Monday’s declines.
Equities fell at the start of the week to give back some of last week’s record-setting advances. Twitter (TWTR) shares extended losses on Tuesday after the company banned President Donald Trump from the platform and stirred up concerns over increased regulatory scrutiny and impacts to user growth. Heavily weighed peer tech stocks including Facebook (FB) and Apple (AAPL) also came under pressure.
Traders have been assessing the path forward for the stock market, weighing the additional stimulus that will likely come to fruition under a unified Democratic government against the ongoing surge in COVID-19 cases and hospitalizations across the country. Fifty percent of the U.S. population will likely receive their first dose of a COVID-19 vaccine by May, Goldman Sachs economists said in a note Monday.
“I think [Monday was] a little bit of profit-taking. Obviously you had a nice move last week with the Democratic sweep scenario, higher expectations of stimulus. But you are seeing a stronger dollar today, higher long-term rates, and I think that’s weighing on market sentiment,” ClearBridge investment strategist Jeffrey Schulze told Yahoo Finance on Monday. “Positioning and optimism are pretty stretched right now – if you look at the put-call ratio from last month, we had seen lower levels that we haven’t seen in two decades. Look at all the optimism surveys, there’s rampant bullishness that’s out there, record margin debt balances right now.”
“I think the markets are a little extended,” he added. “It wouldn’t surprise me if you saw a little consolidation here over the next couple of weeks, somewhere in the 5% range. But I do think that this is going to be a buying opportunity for a … very strong economic growth picture you’re going to see in 2021.”
A number of other strategists have also alerted that a near-term pull-back in the stock market may occur, especially following 2020’s double-digit year and extended run-up into the beginning of 2021. However, as caution over a near-term dip or correction grows to become the consensus, some other strategists have encouraged taking the opposite view.
“Widespread speculation of an imminent stock market bubble, not to mention calls for a potential sharp correction in the first half of 2021, only to be followed up by strength during the second half, represents excessively consensus thought by most clients we speak with, which only makes us want to go the other way,” BMO Capital Markets strategist Brian Belski said in a note Monday.
“As such, we believe the first part of 2021 will be much stronger than most investors are imagining, helped along by a larger-than-anticipated stimulus package by the new administration that could be used to justify much more aggressive pandemic-fighting strategies — including, but not limited to, coordinated regional or even a nationwide…
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