MARKET FOCUS: STIMULUS, SERVICE SECTOR, AND BLOCKBUSTER HOME SALES




Stocks opened lower this morning after generally unchanged yesterday. Investors are pausing to get more specifics from the Biden administration. Equity markets will love the increased spending, but how much love is where markets are today.

Biden wants a $1.9 trillion stimulus package to shorten the economic decline. Most world leaders are taking a more conservative outlook. Hopes that activity can return to normal in the hardest-hit economies are becoming increasingly distant despite the progress being made on vaccinations. U.K. Prime Minister Boris Johnson signaled that the country's current lockdown could last until the summer while officials there have suggested paying people who test positive for the virus to stay at home. German Chancellor Angela Merkel said it would be late September before everyone who wants to get vaccinated can get a shot. Anger is rising across Europe as the supply of Pfizer vaccines slows. In the U.S., President Biden will sign executive actions today that will boost food assistance for impoverished Americans.

The damage being done to economic activity was laid clear in this morning's Purchasing Managers Index numbers from Europe, which clearly signaled a double-dip recession in the euro area. IHS Markit's gauge of private-sector activity fell to 47.5, with the service sector continuing to lag, while manufacturing in Germany remained strong. Output in the U.K. fell at the quickest pace since May, with Brexit delays adding to the pandemic-driven slowdown. The ECB's survey of professional forecasters expects 2021 growth of 4.4%, down from the previous forecast for growth of 5.7%.

At 9:30 am ET, the DJIA opened -178, NASDAQ -47, S&P -17. 10 yr 1.09% -2 bp. FNMA 2.0 30 yr coupon +6 bp, -8 bp from 9:30 yesterday. 2.5 FNMA coupon +12 bp, -4 bp from 9:30 am yesterday.

At 9:45 am ET, Dec PMI expected at 55.5 as released 58.0; services PMI expected at 53.8 increased to 57.5. The strength is much stronger than in Europe.

At 10:00 am ET, Dec existing home sales were thought to be 6.550, as released +0.7%.

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