Stocks rose on Tuesday morning as investors weighed earnings reports from Bank of America, Goldman Sachs, and Halliburton, and congressional testimony from Treasury Secretary nominee Janet Yellen. The former Fed president said that she would focus on boosting employment and wages, which have been battered by the pandemic, and that economic recovery also depended on the rapid and broad distribution of coronavirus vaccines. The Dow rose 0.3%, the S&P 0.5%, and the Nasdaq 0.7%. Crude oil traded near $53 per barrel, while gold rose $11 to $1840 per ounce.

We saw some strange days late last year, and the majority of them had to do with the massive rotation that was happening at the time. But maybe we should start calling days like Thursday more the norm than wacky. As we said a few days ago, 2021 is starting out as the polar opposite of 2020 -- at least as far as the markets are concerned.

Stocks edged higher on Wednesday morning, reversing early losses amid optimism about new fiscal stimulus spending and improving economic conditions in 2021. Inflation data was muted. The Labor Department reported that its consumer price index rose 0.4% in December, driven mainly by higher gasoline prices, up from 0.2% growth in November and in line with consensus expectations. The CPI also increased 1.4% from the prior year, up from 1.2% in November. The Dow rose 0.1%, the S&P 0.1%, and the Nasdaq 0.3%. Crude oil traded near $53 per barrel, while gold rose $14 to $1858 per ounce.

The Portfolio Selector features the Argus Focus List, a group of 30 "best idea" stocks generated and regularly updated by Argus' analysts and investment policy committee. It also includes the director of research’s monthly investment strategy column, stock recommendations and sector picks, economic forecasts, and an asset allocation model. This month, the Focus List additions are Anthem Inc (ANTM); Activision Blizzard Inc (ATVI); Coca-Cola Co (KO); International Business Machine (IBM) and the Focus List deletions are Procter & Gamble Co. (PG); Electronic Arts, Inc. (EA); CIENA Corp. (CIEN); Vertex Pharmaceuticals, Inc. (VRTX).

The U.S. economy lost 140,000 jobs in December -- reversing a positive pattern of employment recovery that had been in place since May. Job losses in the leisure and hospitality sectors reflected the recent increase in coronavirus cases in the U.S. and the efforts of states to contain the pandemic. The unemployment rate was steady at 6.7%. Notable job losses occurred over the month in leisure, education and government. The number of jobs increased in the temporary help and courier segments. In December, 23.7% of employed persons teleworked because of the coronavirus pandemic, up from 21.8% in November. The number of unemployed persons, at 10.7 million, was up 5 million from the February level. On Thursday, the Labor Department reported that another 787,000 people filed initial unemployment claims, and the total of continuous claims was 5.2 million, down from 6.2 million a month ago. These data points indicate that the employment environment, while improving, is still under stress. We expect the unemployment rate will remain high (and the Federal Reserve will keep interest rates low) into 2021 as the U.S. economy slowly recovers.

Our bond/stock asset-allocation model is rendering the two assets in line at fair value. That means that neither one is a clear over-weight in diversified portfolios. Our model takes into account current levels and forecasts of bond yields, inflation, stock prices, GDP and corporate earnings. The model output is expressed in terms of standard deviations to the mean, or sigma. The mean reading from the model, going back to 1960, is a modest premium for stocks, of 0.18 sigma, with a standard deviation of 1.0. The current valuation level is 0.01 sigma premium for stocks, essentially in line with fair value. The model has done a good job of highlighting value. For example, stocks were very attractive compared to bonds in the late 1970s, when benchmark Treasury rates were in the high teens before heading consistently lower over recent decades. The model indicated that stocks were at a sharp premium to fair value prior to the "dot-com" crash of 2001 and prior to the Great Recession in 2007-2009. Starting in 2009, the model favored stocks -- another good call. As the chart shows, the market can manage with premiums and discounts for an extended time. Equity valuations will likely start to improve further once corporate earnings begin to rebound next year.

This pick list highlights constituents of the Morningstar US Large Cap Index that we believe offer investors the best risk-adjusted return prospects. Stocks of large-cap companies where neither growth nor value characteristics predominate. Stocks in the top 70% of the capitalization of the U.S. equity market are defined as large cap.

Last week, we talked about precious metals having been dead money since peaking in a parabolic move in early August. Steep moves to the upside typically see fairly large countertrend moves to the downside and also take time to bottom. Over the past couple of weeks, there has been a little spark under the metals, especially silver -- so it's possible we are finally at the beginning of another upside run.

Outlooks from purchasing managers and the manufacturing sectors they represent are mixed, this as a new wave of COVID-19 cases spreads and certain economies have shut down in response. Take a look at the UK, which recently reported a November manufacturing PMI reading of 47.4 (with reading having to be above 50 in order to indicate economic expansion.) Though that's quite a recovery from 8.2 back in April, it's a drop from 52.1 in October and 59 in August. The experience was similar in the Eurozone, which recorded a 45.1 PMI in November, up from 13.6 in April but down from October and August. Nations that have heavier exposure to industrial activity, such as Germany and the U.S., have reported more-consistent PMI readings, as has China. Indeed, China blazed the trail for the global recovery. In February, China's PMI reading was 40.3 -- but as of August, the reading was up to 53.1. Japan is one of the few major industrialized nations that has not yet seen its manufacturing sector recover since the pandemic began.

Damaged but Resilient Economy Carried Stocks across 2020

Maybe you intend to catch-up on certain things over the holidays. That's what defensive sectors appear to be doing in the fourth quarter. At the nine-month mark, income-oriented, defensive, and/or cyclical sectors were deeply lagging -- and they won't catch the leaders in 2020. But in the past two months, formerly unloved sectors have meaningfully closed the gap.

This pick list highlights constituents of the Morningstar US Large Cap Index that we believe offer investors the best risk-adjusted return prospects. Stocks of large-cap companies where neither growth nor value characteristics predominate. Stocks in the top 70% of the capitalization of the U.S. equity market are defined as large cap.

The stock market rallied last week, closing a holiday-shortened Friday at new closing records for Nasdaq and the S&P 500. With just a single trading day left in November, the market is on track for its best month since April. On Friday, the Dow Jones Industrial Average rose 38 points, or 0.13%. The S&P 500 edged up 9 points, or 0.24%, and the Nasdaq Composite was up 111 points or 0.92%. Last week, the Dow was up 1.45%, returning to growth after the month's only down week. The S&P 500 was up 1.6%. The Nasdaq was up 301 points or 0.92%. For the year-to-date, the DJIA remains in positive territory with a gain of 4.8%. The S&P is up 12.6%, and the Nasdaq is up 36.0%. Over the past 52 weeks, the Dow is up 6.2%, the S&P 500 is up 15.4%, and the Nasdaq is up 40.2%.

Stocks were mixed on Wednesday morning after reaching record levels on Tuesday. On the employment front, first-time claims for state unemployment benefits rose to 778,000 for the week ended November 21, up from 748,000 a week earlier and above the Bloomberg consensus forecast of 730,000. Core capital goods orders excluding aircraft rose 0.7% in October, down from 1.9% in September but above the consensus forecast of 0.5% growth. The Dow fell 0.6%, the S&P fell 0.3%, and the Nasdaq rose 0.1%. Crude oil traded near $45 per barrel, while gold rose $5 to $1809 per ounce.

This edition features digital ad spending outlook; pandemic's impact on payments industry; chipmakers; and notes from Boeing, Amazon, and Curaleaf.

The S&P 500, S&P MidCap 400 and Russell 2000 (IWM) hit all-time highs (ATHs) last week, while the Nasdaq Composite and the Nasdaq 100 (QQQ) lagged behind. Strange times indeed. The Energy (XLE) sector was the market leader last week, soaring 17%. Year-to-date, the XLE is still at the bottom of the sector heap, down 41% -- so there is still a lot of work to do. In second place last week, Financials (XLF) jumped 8.3%. The XLF is still down 10.4% for the year and remains the second-worst YTD performer.

The 3Q20 EPS season is mostly in the record books, with retailers the last group to report. The results were not pretty, but were better than 2Q20. Through mid-November, Refinitiv reported that S&P 500 earnings declined in 3Q at a 7.4% rate -- a vast improvement from the prior quarter's 30.5% decline. Excluding the Energy sector, earnings declined at a 3.2% rate. Of the 462 companies in the S&P 500 that have reported earnings to date for 20Q3, 84% have reported earnings above analyst expectations. This compares to a long-term average of 65% and prior four-quarter average of 73%. Our analysts are always looking for companies that raise their outlooks during earnings season. Management's ability to "raise guidance" can often be a catalyst to strong returns in the quarters ahead. There were not many in this most-recent period. Here are 12 BUY-rated companies in Argus Coverage for which management has raised guidance or increased its outlook during the recent EPS reporting season.

This pick list highlights constituents of the Morningstar US Large Cap Index that we believe offer investors the best risk-adjusted return prospects. Stocks of large-cap companies where neither growth nor value characteristics predominate. Stocks in the top 70% of the capitalization of the U.S. equity market are defined as large cap.

Stocks fell sharply on Friday morning, led by selloffs in the Technology and Consumer Discretionary sectors. Apple shares fell 5%, despite above-consensus earnings, on concerns about weak iPhone sales and declining revenue in China. The company also declined to provide guidance for the current fiscal first quarter. Amazon also posted strong 3Q results but provided disappointing 4Q earnings guidance, sending the shares down about 4%. The Dow fell 1.5%, the S&P 1.8%, and the Nasdaq 2.7%. Crude oil fell to $35.50 per barrel, while gold rose $12 to $1880 per ounce.