If You Like Pina Coladas…Just a week in and already thinking of an “Escape” from this glacial, Northeast terrain? You are not alone. The good news is 2021 is quickly shaping up (unlike our decrepit physical bodies) to be anything but bland, and should continue to befall us with a number of high octane moving parts throughout the year. We’ve got gadgets and gizmos of plenty, potential melt-up risk galore. You want asset bubbles? We’ve got twenty! But who cares…no big deal…we want mooore….stimulus (Name That Tune is back on TV, fyi). Either way, today is being passed off as a pause for breath with tech bearing the brunt of the losses. There is very real potential for heavily enhanced regulation of big tech after the storming of the Capitol was planned and discussed on social media. Twitter is down 5% after banning President Trump’s personal account, citing the risk of further incitement of violence. But again, today’s move is merely a cooling off. The signs of exuberance are not fading away and as long as the Fed is engaged, why should they? Clarida’s comments last week eased concerns around Fed tapering, and Brainard and Powell speaking this week are unlikely to rock the boat as well. Much is being made of yields and $ rising, but perspective is key: The UST 30-yr is still only where the 10-yr was this time last year (and most of major sovereigns are negative yielders); Equity TINA is still not at risk yet.

Freddie Mercury Was Right… “Nothing really matters, anyone can see…Nothing really matters, nothing really matters to the S&P-eeeee”. At least that what it seems like as we wrap up a chaotic opening week that’s felt longer than a half-speed rendition of “Bohemian Rhapsody”. The “Everything Rally” has more than picked up where it left off last year, and the list of indices that made ATHs on yesterday’s close (S&P, SML, RTY, MID, CCMP, NDX, SOX, TRAN) made clear that really means everything. While the party hasn’t completely stopped today, enthusiasm is understandably tuckered out at the moment (with some exceptions). Banks are taking a breather after a surging through the week, even as the US 10-yr yield has continued to push higher above 1.1%; same goes for Cap Goods names that earlier cheered the potential for greater infrastructure spending under a Democratic Congress. It seems even Semis are a bit tired, with Micron (MU -1.9%) now red even after raising its sales forecast. One notable exception that never seems to run out of gas is Tesla (TSLA +6.2%) which is driving Autos higher (I have a feeling we’ll be saying this a lot from now on) and helping ensure NYFANG (+1.7%) will finish the week well in the green.

Lessons Learned… “Expect the unexpected”… Surely if 2020 taught us anything, that would be one of the primary takeaways. With that in mind, it’s not a shock to see investors treating the Senate run-off election in Georgia with caution despite the increasingly shaky consensus there won’t be a Democratic sweep. Yet US indices are attempting to make up some of the ground lost in yesterday’s bumpy ride (granted on near holiday-like volumes), thanks largely to Energy leading the way on back of WTI crude briefly rallying past $50 for the first time since February as OPEC+ reaches a deal on voluntary output cuts through March (XOP +9%). The positive start to year in terms of eco-data continues, as a solid beat from Dec ISM Manufacturing helped solidify the positive tone this morning. The gains also come as Value is outpacing Momentum names (VLUE +1.3% vs MTUM +0.6%), as a Democrat triumph would mean more stimulus spending (DXY lower again) and as the profit-taking action seen yesterday sees some follow through. The love for Cyclicals consequently has more defensive sectors on the back foot: Food Retail, Household Goods, and Telcos are all in the red.

Plowing Ahead… Neither rain, nor sleet, nor a big blanket of snow (as has covered the US Northeast) can put a dent in the ongoing enthusiasm for stocks. Same goes for disappointing eco data, as jobless claims coming in at their highest reading since early Sept has only further fixated attention on the hurried stimulus negotiations in Washington.

Stuck in Neutral – A 14% year for the S&P would be welcome in any year, most definitively this one. But while we’re here setting new all-time highs, why not get that extra performance via the holiday seasonality before we close up shop, AMIRITE? That “effect” has yet to fully kick in and despite yesterday’s move signaling the sleigh bells could be in transit, it’s been a mixed bag thus far today.

Back On Track… It was beginning to look like a “here we go again” type of Tuesday, with equities again opening the day green and then beginning to fade, but US indices are now seemingly determined to snap the S&P’s 4-day losing streak (only the 2nd this year) as they push higher into the afternoon. As NYC battens down the hatches for an impending snowstorm, the bulls are charging ahead once again thanks to (what else?) progress on stimulus talks. To be fair, a deal does seem to be getting closer as the two-part deal garners wider support and Senate and House leaders are set to discuss at a 4pm meeting later today (need to save some optimism for another green day tomorrow). The one-track stim focus has brushed aside any concern around a lighter than anticipated Empire Manufacturing print (Nov Industrial Prod’n data was inline) and allowed rising virus cases and the threat of stricter lockdowns to continue to be treated as old news. “Technology” is leading the way among S&P sectors, but looks can be deceiving. NYFANG index is trading up +1.2%, but 8/10 names trade lower: the space is standing on the weighty shoulders of Apple (AAPL +4.2%) which announced plans to increase iPhone production and in lesser part due to Baidu (BIDU +10%) roaring higher on a report it will make its own EVs. Otherwise FB, AMZN, and GOOGL all sit in the red after the EU announced tougher anti-trust regulation on the tech giants (what else is new?) leaving Media and Software as underperformers (*update* of course GOOGL and AMZN pushed into the green in the last 45 mins). Value is putting in a decent showing, with gambling names carrying Hotel/Leisure, and Energy is following Crude’s recovery from early losses despite as less than rosy demand outlook from OPEC+.

Cold Water Thrown… Futures were boosted this morning by that familiar, warm feeling of “stimulus hopes”, but some less than encouraging signaling from Congress has US indices sliding lower into the afternoon. You’d think we’d have learned not to put too much faith in assertions of “progress” in negotiations (given we heard a lot of the same even back when Trump still had the incentive of an election to get a deal done) but with so many indices notching ATHs based on the negotiations, you have to take the bad with the good. And for the most part, things are still looking UP for stocks: today’s IPO menu (more below) shows investors’ appetite for risk is far from satiated. Tech is leading the way lower as the session is clinging to its Rotation-ary tilt despite the building sogginess (NDX snapping a 10-day win streak). Autos are leading, along with Telcos getting a boost from AT&T (T +1.8%) reportedly get a bid for DirecTV valuing it at over $15bn. Energy was hanging tough, but has faded as Crude falls back into the red after earlier shrugging off a larger than expected build in US stockpiles.

Like An Old Shoe – When things seem to be a bit unclear for this market, it dances with who brought it. And that means a default to the growth and technology names as investors grapple with the short-term economic, physical and mental pain wrought by COVID vs promises for a new and better day down the road. The market has done a remarkable job of compartmentalizing but the escalating headlines over increased cases, hospitalizations, deaths and lockdowns is enough to temporarily at least shove the value/cyclical trade back in its box. Why would you blame them either, when even a hint of growth/tech is like strapping a rocket booster to a stocks back. Luminar the case in point, up another 16% today. Homebuilders are on the move higher as well, but that seems more a case of mean reversion after an ugly week, ITB.US losing nearly 4%. Energy would be the biggest profit-taking target after a strong last week and absurd past month and restaurants and hotels also moving lower as California goes into nearly complete lockdown and states on the east coast feel to be on the precipice of the same. But there always seems to be a catalyst set to overcome any obstacles in the market’s way. A massive stash cash, largely by households, could be just that thing as the FDA looks to approve the Pfizer vaccine later in the week.

End On a High Note… We’ve seen some recent examples of just how jumpy investors are at these lofty heights (i.e. yesterday’s Pfizer scare / the 10-year yield’s quick bounce off .90% post-NFPs this morning) but in general the arrow continues to point higher for the market. Therefore it’s no surprise stocks are well in the green this afternoon as they put on display their ability to shrug off pretty much anything, including weaker than forecasted NFPs this morning. Ongoing stimulus talks of course make that shrugging even easier, and the “hope” springing from continued dialogue between Democrats and Republicans is helping to drum up the session’s risk-on tone. Value is back on top with Energy (crude still riding high off the OPEC+ agreement), Autos, and Banks all outperforming, but Semis are also crashing the party with several constituents (MU +5.8%, QCOM +4.5%) continuing their daily appearance son the 12-month relative high list. Utilities and Household good are lower as defensives underperform, while the USD has managed to slow its slide for today at least.

Struggle for the Spotlight… The struggle for the spotlight between stimulus and vaccine “hopes” continues as headlines on both fronts came into play in the last 2 hours of the day. US indices regathered steam after 2pm as investors digested more Republicans throwing their support behind the $908bn bipartisan bill, getting an extra boost on word that Trump ally Lindsay Graham backed the compromise and had discussed it with the President (quote below).