Stronger economic data could propel stocks that will thrive in a recovery in the coming week

A decline in the number of new Covid infections, along with improving economic data and hopes for stimulus measures, could boost stocks that are thriving in the coming week in an improving economy.

In the past week, expectations for a strong economic recovery added to interest rates.

While the broader stock market was choppy, sectors that did well during a recovery – financial services, airlines and industrial companies – stood out as leaders. This is known as the reflation trade.

Those stocks rose at the expense of growth and technology, down 2%. Strategists expect reflation trading to continue as signs suggest the economy could make a sharp comeback.

The S&P 500 fell 0.7% this week to 3,906, while the Dow was up just under 0.1% to 31,494. The Nasdaq was down 1.57% this week to 13,874, with the tech slump. For example, Apple gave up 4% in the week.

The big event in the coming week is the testimony of Federal Reserve Chairman Jerome Powell, who gives his semi-annual testimony on the economy before the Senate Banking Committee on Tuesday and before the House Financial Services Committee on Wednesday.

He is expected to discuss the rise in interest rates, as well as concerns that inflation could start to rise.

“He will have to acknowledge that the data is improving and the virus situation is improving significantly,” said Mark Cabana, head of US interest rate strategy at Bank of America. “It will be difficult for him to sound as moderate as he has been.”

But Powell is expected to continue to emphasize that the Fed will keep interest rates low for a long time and maintain its easy policy to help the economy.

Economists have ramped up tracking forecasts for Q1 gross domestic product over the past week, fueled in part by an unexpectedly sharp 5.3% rise in retail sales in January.

Goldman upped growth to 6% in the first quarter, and Morgan Stanley said it was 7.5% for the first quarter. Economists linked the surprising retail gains to stimulus vouchers sent to individuals as part of the latest $ 900 billion stimulus program approved by Congress in late December.

The Biden government has proposed a new $ 1.9 trillion aid package for Covid. That could come before the Lower House in the coming week.

[Powell’s] stay with the script. The script is that lawmakers must continue to support the economy. He will support the government’s efforts to get a big package through, ”said Mark Zandi, chief economist at Moody’s Analytics.

Income remains important. There are more than 60 companies reporting, including Home Depot, Macy’s and TJX.

Key economic reports falling next week include durable goods on Thursday, along with personal income and spending data on Friday

The Friday report includes the price index for personal consumption expenditure, which the Fed monitors. The market is looking for signs of rising inflation.

“I think the boom will start sooner than most people think,” said Ed Keon, chief investment strategist at QMA.

He said the stronger economy is helping government bond yields rise, with 10-year yields hitting a one-year high of 1.36% on Friday. Keon said the rollout of the vaccine helps the outlook, as does the slow spread of the virus.

“I think people expected a boom in the second half, but I think the second quarter will be very strong as people change their behavior,” he said.

“The caution when it comes to saving and not going out is going to disappear sooner than we think,” Keon said. “Right now you might see a figure of 10% of GDP in the second or third quarter. That’s also due to the fact that we’re likely to get a big stimulus package.”

He said investors are underestimating the surge in economic activity that should begin in March and will pick up steam in the second and third quarters as more people eat out and resume other activities.

“I think the world is going to look very different from the past 12 months. We are still optimistic. We are still overweight stocks,” said Keon.

He said a flow of money could hit the economy.

“The size of the US economy was about $ 21 trillion last year,” Keon added. “Households now have excess savings of about $ 1.5 trillion and the stimulus package is likely to be in the neighborhood of $ 1.2 or $ 1.6 trillion.”

He said the services sector should start to see an advantage that has increased the goods-producing side of the economy. “You will see an incredible thump.”

Monday

Merits: Dish Network, Royal Caribbean, Marathon Oil, Ingersoll-Rand, Occidental Petroleum, Transocean, Zoominfo, ONEOK, HSBC

10.00 am Leading economic indicators

Tuesday

Merits: Home Depot, Macy’s, Intuit, Thomson Reuters, Square, Toll Brothers, Jazz Pharmaceuticals, McAfee, Medtronic, Pioneer Natural Resources, Bank of Montreal

9:00 am FHFA home prices

9:00 am S & P / Case-Shiller home prices

10:00 am Fed Chairman Jerome Powell Senate Banking Committee semi-annual economic testimony

Wednesday

Merits: Lowe’s, NVIDIA, Viacom, Public Storage, Booking Holdings, TJX, Brookdale, Royal Bank of Canada, Apache, Petrobras, Pure Storage, L Brands, Casper Sleep

7:00 am Mortgage applications

10:00 am Sale of new homes

10:00 a.m. Half-year economic testimony from Fed Chairman Powell at House Financial Services Committee

Thursday

Merits: Salesforce.com, Norwegian Cruise Lines, Etsy, Best Buy, HP, Shake Shack, Beyond Meat, Anheuser-Busch Inbev, Dell Technologies, Virgin Galactic, American Tower, Cleveland Cliffs, Airbnb, Carvana, Door Dash

8:30 am Atlanta Fed President Raphael Bostic

8:30 am Unemployment requests

8:30 am Durable goods

8.30 am Q4 GDP second reading

10:00 am Awaiting home sale

10.00 am Advanced Economic Indicators

10:00 am St. Louis Fed President James Bullard

3:00 pm New York Fed President John Williams

Friday

Merits: Fluor, Cinemark, Draft Kings, Foot Locker, AMC Networks

8.30 am Personal income and expenses

8:30 am Advanced trading

9:45 am Chicago PMI

10:00 am Consumer feeling

Saturday

Income: Berkshire Hathaway