Thursday January 14th

14-01-2021

Dow futures rise 100 points ahead of Biden stimulus package unveiling

U.S. stock index futures gained on Thursday as traders weighed a potential big economic stimulus package and more good vaccine news versus pressure from rising rates and political turmoil. Futures on the broader market were flat. Dow futures added 100 points, or 0.2%, indicating an opening gain of more than 100 points. S&P 500 futures were up 0.2% and Nasdaq 100 futures were flat. President-elect Joe Biden is expected on Thursday evening to unveil a stimulus plan that will include a boost to the recent $600 direct payments, an extension of increased unemployment insurance and support for state and local governments. The stimulus could be as big as $2 trillion, CNN reported. “Stocks are extending their gains thanks to ongoing stability in the ‘three pillars’ (stimulus, vaccines, and earnings),” wrote Adam Crisafulli of Vital Knowledge in a note. “The $2T number is about inline w/expectations and investors need to watch yields very closely...All the Trump impeachment noise is largely irrelevant to markets.” Trial data published on Wednesday showed that Johnson & Johnson’s one-dose coronavirus vaccine is safe and generates a promising immune response. Investors also digested worse-than-expected jobless claims data. First-time claims for unemployment insurance jumped to 965,000 last week, higher than an estimate of 800,000 new claims, according to economists surveyed by Dow Jones. On Wednesday, the S&P 500 and Nasdaq Composite gained 0.2% and 0.4%, respectively. The Dow, meanwhile, closed flat. The market held up even as as House members voted to impeach President Donald Trump for a second time — making him the first U.S. president ever to be impeached twice — as a bipartisan majority charged him with inciting a riot in the U.S. Capitol last week. Wednesday’s gains for the S&P 500 and Nasdaq came after Intel rallied nearly 7% to lead tech stocks higher. They also followed U.S. interest rates easing from their highest levels since March 2020. The benchmark 10-year note yield slipped to 1.09% on Thursday a day after hitting a high of 1.18%. That decline in rates came as Federal Reserve officials noted that monetary policy will remain easy for the foreseeable future. Yields were slightly higher again on Thursday with the 10-year yield at 1.11%. Rates have been rising this year amid the prospects of increased U.S. fiscal stimulus after the Democrats secured majorities in both the House and Senate. Inflation expectations have also been picking up recently. “We think inflation in the U.S. will be higher than most expect over the next couple of years,” wrote Adam Hoyes, assistant economist at Capital Economics. “At the same time, we think that investors are overestimating how quickly the Fed will allow monetary conditions to tighten. The Fed’s new flexible average inflation targeting framework suggests that it will allow inflation to rise above 2% for a period over the coming years.” Stocks in Asia-Pacific were mixed on Thursday as investors regionally reacted to Chinese trade data for December. Mainland Chinese stocks declined on the day: The Shanghai composite shed 0.91% to 3,565.90 while the Shenzhen component dropped 1.922% to 15,070.13. Hong Kong’s Hang Seng index advanced 0.68%, as of its final hour of trading. In Japan, the Nikkei 225 rose 0.85% to close at 28,698.26 while the Topix index edged 0.48% higher to finish its trading day at 1,873.28. South Korea’s Kospi closed slightly higher at 3,149.93. Oil prices eased for a second day on Thursday as mounting coronavirus cases globally raised demand concerns, although a drawdown in U.S. crude stocks for a fifth straight week and robust data from China capped losses. Brent crude oil futures fell 37 cents, or 0.66%, to $55.69 a barrel, while U.S. West Texas Intermediate (WTI) slipped by 25 cents, or 0.45%, to $52.67 a barrel. Gold prices edged lower on Thursday as the dollar steadied and U.S. Treasury yields held near 10-month highs, with markets waiting for President-elect Joe Biden to reveal details of his stimulus plan. Spot gold fell 0.3% to $1,838.44 per ounce, while U.S. gold futures slipped 0.8% to $1,839.80.