Wall Street on Wobbly Legs After GameStop Frenzy

Powell noted that the single most important metric for the economy will not come from the central bank, or indeed out of Washington, D.C., but from pharmaceutical companies. “There’s nothing more important right now than people getting vaccinated,” he said.

Fortunately, the vaccination rollout continues, with a new name likely soon to be added to the menu of vaccine options. 

On Friday, Johnson & Johnson announced that its vaccine has made its way out of Phase 3 trials. While the vaccine is a single dose, it also is less effective than its double-dose counterparts at Moderna and Pfizer/BioNTech, showing a 66% global efficacy rate against Covid-19 and an 85% efficacy against preventing severe cases of the disease. 

The company promises 100 million doses by June if the Food and Drug Administration approves emergency use for the vaccine. 

Meanwhile infections of Covid-19, new strains of which have been found to be more transmissible, continue to increase at a rapid clip. According to Johns Hopkins University, more than 101 million cases of Covid-19 have been reported worldwide, with nearly 2.2 million deaths. In the United States, 25 million Americans have contracted the disease, while more than 433,000 have died.

Beyond the virus front, economic data this week shows a mixed bag recovery.

The good news? U.S. gross domestic product actually grew last quarter by 4% on an annualized basis, according to the Bureau of Economic Analysis. Despite the huge gouge to the U.S. economy during the second quarter of last year, a massive rebound in the third quarter and lesser one in the fourth helped patch over the some of the scars.

The bad news? In 2020, the U.S. economy also shrank by 3.5%, posting the worst year of economic growth since World War II and the first time the economy went backward since 2009.

“This advance, in line with expectations, confirms our view that the economy carried little momentum at the start of 2021, but it tells us very little about the prospects for growth in the coming months,” wrote Gregory Daco, chief U.S. economist at Oxford Economics, who doesn’t expect GDP to get back to its peak 2019 level until next quarter.

“Against the risk of excessive winter pessimism, we believe in spring optimism,” Daco wrote. “We foresee record-breaking consumer spending growth in 2021, with households benefiting from a watered-down $1.2 trillion version of Biden’s American Rescue Plan, vaccine diffusion gradually reaching two-thirds of Americans by July, and employment accelerating this spring.”

For the moment, unemployment remains high, with new claims once again dropping but still higher than anybody wants. For the week ending January 23, new claims fell to 847,000 from 914,000 the prior week. Including federal unemployment assistance, a total of 1.3 million claims were filed, roughly the same number as the previous week. 

Some experts hope when the spring rolls around, the combination of seasonal trends and greater vaccination rates cut into the high unemployment numbers. 

Daniel Zhao, senior economist at Glassdoor, wrote that “the pandemic is likely exacerbating normal seasonal trends” such as restaurants and bars furloughing and laying off workers during the slow winter season. “And just as the winter weather has exacerbated layoffs as the pandemic worsened, it may also slow down the rehiring of workers if businesses remain closed,” he wrote.  

Corporate earnings this week also painted a mostly positive picture for certain industries, technology in particular. 

Both Apple and Facebook showed significant gains. Apple reported a $20 billion increase in net sales compared with a year ago and about a $6.5 billion increase in net income. Apple’s $111 billion in net sales during the fourth quarter of 2020 marks a new quarterly record for the company.

Facebook also saw its revenue jump from a year ago, gaining about $7 billion in revenue and $4 billion in net income year over year. “I’m excited about our product roadmap for 2021 as we build new and meaningful ways to create economic opportunity, build community, and help people just have fun,” CEO Mark Zuckerberg said in a statement. 

Some sectors continue, however, to struggle. McDonald’s, typically no shrinking violet when it comes to profit-making, posted earnings slightly less than what many analysts had expected. The fast-food giant saw its fourth-quarter revenue dip 2% compared with the fourth quarter of 2019, while its net income fell $195 million, or 12%, year over year. 

Follow @NickRummell

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