Indices Reverse Losses; Open Starts the Week Strongly as Coronavirus Infection Rates Drop

Buoyed by the falling coronavirus infection count rate, Joe Biden's America First policy, and plans of more fiscal support—likely to accelerate the recovery of the United States economy, the stock market started the week strong,pushing major indices marginally higher. It is still below expectations as most analysts expected a strong start to the week. Further supported by an accommodative monetary policy environment and plans of loosening containment measures, gains could extend today.

Details:

The stock market and indices are sensitive to how the government will best handle the coronavirus pandemic. As a causative agent, containment measures literally capped the stock market from advancing, even crashing at some point last year. However, infection rates and hospitalization are decreasing. Subsequently, California is expected to lift the stay-at-home order, a change that will allow small businesses to re-open outdoor dining and services. Combined with a loose monetary policy and promise of even more money, traders believe that the current liquidity will help sustain the stock market and indices even if politicians are bickering around the new stimulus package.

Impact on Indices:

Neutral to bullish. Economic outlook will only remain bullish if Joe Biden's administration successfully quashes the spread of the coronavirus. A key to this will be how well vaccines are distributed and how well the central bank will respond, especially when meeting investor expectations.

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