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Beyond the Numbers

Optimism About Biden’s Covid Plan May Lead To Strength On Wall Street
1/21/2021 9:07 AM

The major U.S. index futures are pointing to a modestly higher open on Thursday, with stocks likely to extend the upward move seen over the two previous sessions.

The markets may continue to benefit from optimism about ramped up efforts to combat the coronavirus under new President Joe Biden.

Biden has revealed new details of his plan to tackle the pandemic, which includes providing more state and local funding to accelerate the vaccine rollout and using the Defense Production Act to increase production of personal protective equipment.

Traders also remain optimistic about more fiscal stimulus under Biden, who has called for a new $1.9 trillion relief package.

However, stock futures have fluctuated following the release of a batch of upbeat U.S. economic data, including a report from the Labor Department showing a pullback in initial jobless claims in the week ended January 16th.

The Commerce Department also released a report showing new residential construction in the U.S. jumped by much more than expected in the month of December.

The reports paint a more positive picture of the economy, but traders may be wary that the data could ease the pressure on lawmakers to approve additional stimulus.

After ending the previous session mostly higher, stocks showed a strong move to the upside during trading on Wednesday. With the continued advance, the major averages all ended the session at new record closing highs.

The major averages saw further upside going into the close, ending the session near their best levels of the day. The Dow advanced 257.86 points or 0.8 percent to 31,188.38, the Nasdaq soared 260.07 points or 2 percent to 13,457.25 and the S&P 500 jumped 52.94 points or 1.4 percent to 3,851.85.

The spike by the tech-heavy Nasdaq was partly due to a sharp increase by shares of Netflix (NFLX), with the video streaming giant soaring by 16.9 percent.

Netflix reached a record closing high after reporting strong fourth quarter subscriber growth, with total subscribers exceeding 200 million.

The company reported fourth quarter earnings that missed estimates, although its revenues came in better than expected and Netflix said it will explore returning cash to shareholders through ongoing stock buybacks.

Big-name companies like Procter & Gamble (PG) and Morgan Stanley (MS) also reported better than expected quarterly results, extending the positive start to earnings season.

The rally on Wall Street also came as former Vice President Joe Biden was in as the 46th President of the United States.

Biden has called for additional stimulus and an accelerated coronavirus vaccine rollout, which has helped offset concerns about higher taxes and increased regulation under a Democratic administration.

The president signed several executive orders shortly after taking office, including orders to rejoin the Paris climate agreement and end former President Donald Trump's Muslim travel ban as well as the construction of the U.S.-Mexico border well.

Housing stocks turned in some of the market's best performances on the day, driving the Philadelphia Housing Sector Index up by 3.9 percent.

The strength among housing stocks came even though the National Association of Home Builders released a report showing an unexpected drop in U.S. homebuilder confidence in the month of January.

Substantial strength was also visible among retail stocks, as reflected by the 3.5 percent spike by the Dow Jones U.S. Retail Index.

Gold stocks moved sharply higher on the day, resulting in a 3.3 percent jump by the NYSE Arca Gold Bugs Index. The strength in the sector came amid a sharp increase by the price of the precious metal.

Software, airline and commercial real estate stocks also saw considerable strength on the day, while natural gas, banking and oil service stocks bucked the uptrend.

Commodity, Currency Markets

Crude oil futures are falling $0.31 to $53 a barrel after rising $0.33 to $53.31 a barrel on Wednesday. Meanwhile, after jumping $26.30 to $1,866.50 an ounce in the previous session, gold futures are slipping $2 to $1,864.50 an ounce.

On the currency front, the U.S. dollar is trading at 103.58 yen versus the 103.54 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.2146 compared to yesterday’s $1.2106.

Asia

Asian stocks rose broadly on Thursday after Joe Biden was sworn in as the 46th U.S. President, helping lift hopes for more fiscal stimulus to fight the coronavirus-led economic slump and spur growth in the world's largest economy.

Chinese stocks rose amid news that China Mobile, China Unicom Hong Kong and China Telecom Corp. have filed a request with the New York Stock Exchange seeking to review their delistings.

The benchmark Shanghai Composite Index jumped 38.17 points, or 1.1 percent, to 3,621.26, although Hong Kong's Hang Seng Index edged down 34.71 points, or 0.1 percent, to 29,927.76.

Japanese shares advanced as the Bank of Japan left its monetary policy unchanged, raised growth projections and noted that risks to both economic activity and prices were skewed to the downside.

Investors cheered government data showing that Japanese exports rose for the first time in two years in December, driven by shipments to China.

The Nikkei 225 Index gained 233.60 points, or 0.8 percent, to finish at 28,756.86, a 30-year high. The broader Topix closed 0.6 percent higher at 1,860.64.

Dentsu Group soared 5.3 percent after a report the advertising giant is looking to sell its Tokyo headquarters in a deal possibly worth 300 billion yen ($2.9 billion).

Panasonic rallied 5 percent after saying it is working on special storage boxes for the coronavirus vaccine. SoftBank Group advanced 2.9 percent after Alibaba Group co-founder and executive chairman Jack Ma's reappearance.

Australian markets rose for a third day after data showed the nation's unemployment rate fell in December.

Data from the Australian Bureau of Statistics showed that Australia's jobless rate dropped to a seasonally adjusted 6.6 percent in December - below expectations for 6.7 percent and down from 6.8 percent in November.

The Australian economy added 50,000 jobs last month, in line with expectations following the addition of 90,000 jobs in the previous month.

The benchmark S&P/ASX 200 Index climbed 53.30 points, or 0.8 percent, to 6,823.70, while the broader All Ordinaries Index ended up 56.10 points, or 0.8 percent, at 7,107.10.

Tech stocks outperformed, with buy-now-pay-later company Afterpay surging 5.7 percent. Gold miners Northern Star Resources and Regis gained around 2 percent as prices of the precious metal hit a two-week high on dollar weakness.

Meanwhile, oil and gas producer Woodside Petroleum fell 1.6 percent after it forecast lower production in 2021.

Seoul stocks rose for the third straight session to hit record highs after data showed the country's exports expanded at a much faster pace in the first 20 days of January on the back of robust shipments of chips and autos. The benchmark Kospi jumped 46.29 points, or 1.5 percent, to 3,160.84.

Market bellwether Samsung Electronics rose over 1 percent, Hyundai Motor, the country's largest automaker, gained 2.1 percent, and its smaller affiliate Kia Motors surged 4 percent.

Europe

European stocks are turning in a mixed performance on Thursday as the European Central Bank left interest rates unchanged but said it stands ready to act to ensure inflation moves towards its target in a sustained manner

Earlier in the day, the Bank of Japan left its monetary policy unchanged, raised growth projections and noted that risks to both economic activity and prices were skewed to the downside.

While the French CAC 40 Index has fallen by 0.4 percent, the U.K.’s FTSE 100 Index is up by 0.1 percent and the German DAX Index is up by 0.2 percent.

Cellnex Telecom, a wireless telecommunications infrastructure and services company, has surged higher after it announced an agreement with Deutsche Telekom to combine their mobile infrastructure in the Netherlands.

Tate & Lyle, a specialty food ingredients manufacturer, has also moved to the upside after announcing the appointment of Vivid Sehgal to the position of Chief Financial Officer.

The Sage Group has also jumped. In its trading update for the three months ended December 31, 2020, the software company said total Group revenue increased by 1.4 percent to 447 million pounds.

Close Brothers Group has also moved notably higher after delivering a strong performance in the five months ended December 31.

Meanwhile, IG Group Holdings has declined. The online trading company reported that its first-half profit before tax increased 129 percent to 231.3 million pounds from 101.2 million pounds in the prior year.

U.S. Economic Reports

After reporting a much bigger than expected increase in first-time claims for U.S. unemployment benefits in the previous week, the Labor Department released a report on Thursday showing initial jobless claims pulled back in the week ended January 16th.

The report said initial jobless claims fell to 900,000, a decrease of 26,000 from the previous week’s revised level of 926,000.

Economists had expected jobless claims to drop to 910,000 from the 965,000 originally reported for the previous week.

The Commerce Department also released a report showing new residential construction in the U.S. jumped by much more than expected in the month of December.

The report said housing starts spiked by 5.8 percent to an annual rate of 1.669 million in December from the revised November estimate of 1.578 million.

Economists had expected housing starts to climb by 0.8 percent to a rate of 1.560 million from the 1.547 million originally reported for the previous month.

The Commerce Department said building permits also surged up by 4.5 percent to an annual rate of 1.709 million in December from the revised November rate of 1.635 million.

Building permits, an indicator of future housing demand, had been expected to slump by 2.1 percent to a rate of 1.604 million from the 1.639 million originally reported for the previous month.

A report released by the Federal Reserve Bank of Philadelphia showed a substantial acceleration in the pace of growth in regional manufacturing activity in the month of January.

The Philly Fed said its diffusion index for current activity soared to 26.5 in January from a revised 9.1 in December, with a positive reading indicating growth in regional manufacturing activity.

Economists had expected the Philly Fed Index to inch up to 12.0 from the 11.1 originally reported for the previous month.

At 11 am ET, the Treasury Department is scheduled to announce the details of this month’s auctions of two-year, five-year and seven-year notes.

Stocks In Focus

Shares of SolarEdge Technologies (SEDG) are moving notably higher in pre-market trading after Morgan Stanley initiated coverage of the solar equipment maker’s stock with an Overweight rating.

Insurance giant Travelers (TRV) may also moved to the upside after reporting fourth quarter earnings that far exceeded analyst estimates.

Shares of Ford (F) are also seeing notable pre-market strength, with the auto giant likely to extend the rally seen in the previous session after Deutsche Bank raised its price target on the company’s stock

On the other hand, shares of United Airlines (UAL) are likely to come under pressure after the airline reported a wider than expected fourth quarter loss on revenues that missed expectations.
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