- Stocks rally on vaccine optimism and stabilization of T-note prices
- Durbin shoots down minimum wage in $1.9 trillion pandemic aid bill, making the bill easier to pass
- Vaccine optimism emerges after Johnson & Johnson vaccine is approved
Stocks rally on vaccine optimism and stabilization of T-note prices — The U.S. stock market on Monday rallied sharply on positive pandemic news and the stabilization of T-note prices after last week’s spike.
The S&P 500 index yesterday rallied sharply by +2.38%, and the Nasdaq 100 index rallied by +2.89%. The S&P 500 index would need to rally by only another +1.2% to match its mid-February record high. The Nasdaq 100 has farther to go and would need to rally by another +4.5% to match its mid-February record high.
T-note prices on Monday remained relatively stable for a second session after last Thursday’s extraordinary upward spike in the 10-year T-note yield to a 1-year high of 1.61%. The T-note yield on Monday closed at 1.42%, which was 19 bp below last Thursday’s 1-year high. The more stable T-note market seen in the past two sessions suggests that last Thursday’s spike was overdone since the Fed is still not expected to raise interest rates or curb its QE program for at least a year. The Eurodollar futures market is not expecting the Fed’s first +25 bp rate hike until late 2022.
However, the markets will remain on edge during the remainder of this week due to appearances by various Fed officials. Last week’s plunge in T-note prices was mainly due to comments by Fed Chair Powell and other Fed officials suggesting that they are ok with the recent surge in T-note yields because it simply indicates that the pandemic is fading and the markets are expecting a full economic recovery.
T-note prices have also fallen sharply due to sharp upward revisions in GDP forecasts tied to past and upcoming fiscal stimulus. President Biden’s $1.9 trillion pandemic aid bill is expected to pass Congress by next Friday. Democratic leaders are already working on the next stimulus package that is expected to include massive spending on infrastructure, clean energy, and other areas.
Durbin shoots down minimum wage in $1.9 trillion pandemic aid bill, making the bill easier to pass — Democratic leaders have given up on including the minimum wage hike to $15 per hour in President Biden’s $1.9 trillion pandemic aid bill that the House passed last week.
The Senate parliamentarian ruled last week that the minimum wage cannot be included in the pandemic aid bill because it doesn’t qualify under the budget reconciliation rules. While many Democrats were disappointed with that ruling, the removal of that measure will make the bill much easier to pass in the Senate since there was opposition among some Democratic Senators to a minimum wage hike to as high as $15 per hour.
Democrats could overrule the parliamentarian on the minimum wage decision with a majority vote, but the Biden administration recently said it does not want Vice President Harris voting in favor of that idea and defying the Senate parliamentarian.
There was some talk among Democrats about devising a tax related to the minimum wage that could help it qualify for the budget reconciliation bill by giving it larger budget impact. However, the No. 2 Senate Democrat, Dick Durbin, said yesterday that the tax idea would not work. He said, “I hope that we think very seriously about dealing with the minimum wage in a different venue.”
The Senate today is expected to continue yesterday’s work of voting on nominations of Biden cabinet officials. However, the Senate is then expected to turn to the pandemic aid bill starting Wednesday. If the Senate revises the House bill, then the House will have to pass the revised version.
Vaccine optimism emerges after Johnson & Johnson vaccine is approved — The stock market yesterday was encouraged by the CDC’s approval of the Johnson & Johnson vaccine on Sunday.
The J&J vaccine has a lower efficacy of 72%-85% (depending on the study) versus the 95% level seen for the Moderna and Pfizer vaccines. However, the J&J vaccine will be much easier to get into the arms of Americans since it is a single-dose vaccine and requires only regular refrigeration, avoiding the special freezers required by the Moderna and Pfizer vaccines.
Now that the J&J vaccine has been approved, it will provide a big boost to the overall availability of vaccinations in the coming weeks. J&J is shipping 3.9 million vaccine doses this week, with some arriving as soon as today. J&J is slated to provide 20 million doses by the end of this month and 100 million doses by the end of June, which would cover 30% of the U.S. population.
Meanwhile, the U.S. vaccination pace stepped up sharply to 2.2-2.4 million doses per day this past weekend. The vaccination numbers have suffered in the past several weeks and dipped as low as 1.3-1.4 million per day due to the cold weather that blanketed the country. The U.S. has so far administered 76.9 million vaccine doses, with 15.3% of the U.S. population receiving one dose and 7.7% of the U.S. population received the full 2-dose regime, according to Bloomberg’s vaccine tracker.
In some other positive news, new U.S. Covid daily cases fell to a 4-1/2 month low of 51,367 on Sunday and then rose just mildly to 53,707 on Monday. The 7-day average of new Covid cases is now falling very slowly but did edge to a new 4-month low of 67,275 on Monday.
The 7-day average of Covid deaths remains high at 2,012, but that is down sharply from the 3,000 level seen as recently as mid-February. The Covid death count should continue to decline due to the sharp drop in new cases.
