Market Analysis

Beyond the Number

U.S. Stocks May Lack Direction Following Yesterday’s Rally
11/25/2020 8:58 AM

The major U.S. index futures are pointing to a mixed open on Wednesday, with stocks likely to show a lack of direction following the rally seen in the previous session.

Traders may be reluctant to make significant moves amid uncertainty about the near-term outlook for the markets after the Dow and the S&P 500 reached new record closing highs on Tuesday.

Some traders may look to cash in on yesterday’s gains, although recent upbeat coronavirus vaccine news is likely to keep any selling pressure relatively subdued.

The upcoming Thanksgiving Day holiday on Thursday may also contribute to below average trading activity on the day.

A slew of U.S. economic data is scheduled to be released today, with a report from the Labor Department showing fist-time claims for U.S. unemployment benefits unexpectedly increased in the week ended November 21st.

U.S. stocks ended on an upbeat note on Tuesday, reacting to news about President-elect Joe Biden's transition to the White House.

The Dow sped past a milestone of 30,000 for the first time and more importantly, held gains and finished above that mark.

The major averages all ended with strong gains. The Dow ended up 454.64 points or 1.5 percent at 30,045.91, settling above the coveted 30,000 mark for the first time ever. The S&P 500 surged up 57.84 points or 1.6 percent to settle at 3,635.43, a record closing high, while the Nasdaq climbed 156.15 points or 1.3 percent to finish at 12,036.79.

The recent encouraging updates on the coronavirus vaccine front continued to aid sentiment. There were concerns about continued spikes in new coronavirus cases in several states across the country, but traders still chose to pick up stocks, hoping the situation will turn for the better once the vaccines start to arrive.

Also, the market appeared to be hoping that a new administration at White House will decide on a fiscal stimulus soon and begin efforts to put the economy back on track.

Data showing a drop in consumer confidence did hurt sentiment, but did not deter traders from picking up stocks.

Chevron (CVX), JP Morgan Chase (JPM), American Express (AXP), Goldman Sachs (GS), General Electric (GE), Boeing (BA), IBM (IBM), Walt Disney (DIS), Travelers Companies (TRV), Microsoft (MSFT) and Intel (INTC) ended stronger by 2 to 6 percent.

American Airlines Group (AAL) and United Airlines Holding (UAL) also ended with handsome gains.

The news about the head of the General Services Administration informing Biden that the Trump administration is ready to begin the formal transition process helped lift sentiment as trading began this morning, and stocks never looked back after opening on firm note.

The development has eliminated some of the lingering uncertainty about the outcome of the presidential election, although President Donald Trump has indicated he will continue to challenge the results in court.

Meanwhile, Biden has reportedly picked former Federal Reserve Chair Janet Yellen as Treasury Secretary.

Commodity, Currency Markets

Crude oil futures are rising $0.32 to $45.23 a barrel after spiking $1.85 to $44.91 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,812.30, up $7.70 compared to the previous session’s close of $1,804.60. On Tuesday, gold plunged $33.20.

On the currency front, the U.S. dollar is trading at 104.43 yen compared to the 104.44 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.1899 compared to yesterday’s $1.1892.


Asian stocks ended mostly higher on Wednesday amid optimism that progress in the development of coronavirus vaccines would hasten the pace of economic recovery and as the formal start of U.S. President-elect Joe Biden's transition to the White House eased some of the political uncertainty.

Chinese shares ended lower for the second straight day, while Hong Kong shares rose for the fourth straight session amid optimism about a global economic recovery.

The benchmark Shanghai Composite Index dropped 40.50 points or 1.2 percent to 3,362.33, while Hong Kong's Hang Seng Index inched up 81.55 points or 0.3 percent to 26,669.75.

Japanese shares again hit multi-year highs but pared sharp gains made earlier in the session following news that the Tokyo Metropolitan Government plans to ask restaurants that serve alcohol to shorten operating hours for three weeks amid a surge in coronavirus cases.

The Nikkei 225 Index advanced 131.27 points or 0.5 percent to finish at 26,296.86, marking the highest close since May 9, 1991. The broader Topix rose 5.27 points or 0.3 percent to 1,767.67.

Market heavyweight SoftBank Group added 0.5 percent and Fast Retailing advanced 0.8 percent.

Mitsui Sumitomo Insurance, a subsidiary of MS&AD Insurance Group, will invest $350 million in U.S.-based home insurance technology company Hippo Enterprises Inc. Shares of MS&AD Insurance rose 0.8 percent.

Among the major gainers, Nissan Motor gained almost 7 percent, Konica Minolta rose 6.3 percent, and Kawasaki Kisen Kaisha climbed 6.0 percent. Conversely, Nichirei Corp. and Kubota Corp. lost 3.6 percent each.

Australian stocks rose for the third straight day, reflecting gains by energy stocks and banks. The benchmark S&P/ASX 200 Index added 39.20 points or 0.6 percent to close at 6,683.30 and the broader All Ordinaries Index ended up 32.70 points or 0.5 percent at 6,888.20.

In the banking sector, ANZ Banking and National Australia Bank gained 3.0 percent each, while Westpac rose 2.1 percent and Commonwealth Bank added 1.5 percent.

Among energy companies, Woodside Petroleum advanced 3.0 percent, Santos gained 2.7 percent and Oil Search ended up 0.5 percent.

Among the major miners, BHP rose 3.0 percent, Fortescue Metals advanced 2.8 percent and Rio Tinto added 1.1 percent.

Harvey Norman reported a 160 percent surge in consolidated pre-tax profit for the first four months of fiscal 2021, but remained cautious about the outlook. The retailer's shares slipped 2.6 percent.

Seoul stocks ended a five-day winning streak after rising to an all-time high on Wednesday. The benchmark Kospi declined 16.22 points or 0.6 percent to 2,601.54.

Market heavyweight Samsung Electronics lost 1.6 percent and SK Hynix dropped 1.4 percent. Chemical maker LG Chem fell 1.4 percent.


European stocks traded lower on Wednesday after initial gains as investors continue to digest continued optimism about coronavirus vaccines and easing of concerns over U.S. President-elect Joe Biden's transition to the White House.

The European Central Bank, in its latest Financial Stability Review, said weak profitability prospects continue to weigh on bank valuations. According to the ECB, lenders might require higher loan loss provisions amid missed payments and rising number of corporate defaults.

The COVID infection rates in many European countries are slowing down. In Germany, Chancellor Angela Merkel is proposing a further tightening of the restrictions until at least December 20, with gatherings of up to 10 people on Christmas and New Year holidays.

French President Emmanuel Macron announced a three-stage relaxation on restrictions and that will begin on Saturday.

In the U.K., authorities approved relaxation of the restrictions on Christmas after a fall in new infections.

UK finance minister Rishi Sunak is set to unveil spending review for the financial year 2021-22. He will announce more investment to help the economy during his appearance before the Parliament.

While the U.K.’s FTSE 100 Index has fallen by 0.6 percent, the German DAX Index and the French CAC 40 Index are both down by 0.1 percent.

On the German corporate side, Deutsche Bank stock was up 3.8 percent. Automaker Volkswagen Group's stock declined 2.6 percent after Bloomberg reported that chief executive officer Herbert Diess is struggling to receive support for his candidates to fill two executive posts. He is also asking the company board to support more significant reforms.

In France, Alstom SA stock gained 2.3 percent and Knorr - Bremse AG stock increased 2.9 percent after their consortium signed a contract with the Cologne Public Transport Authority for the supply of 64 low-floor trams valued at 363 million euros.

In U.K., Elementis shares were trading up 2.6 percent after the specialty chemicals and personal care business rejected a revised all-cash takeover offer from Minerals Technologies Inc.

Melrose Industries Plc stock grew 3.9 percent after the company reported that it is currently trading at the top end of the Board's expectations for 2020, driven by faster than expected recovery in automotive markets.

Genus plc stock gained 5.7 percent after the company said its trading for the four months ended October 31 was ahead of expectations.

AA Plc stock increased 7 percent after the roadside recovery company agreed to be acquired by private equity groups TowerBrook Capital Partners (U.K.) LLP and Warburg Pincus International LLC.

United Utilities stock was up 3.7 percent after first-half positive earnings results, while Future plc stock was losing 13.7 percent.

In Switzerland, Basilea Pharmaceutica AG stock gained 5.3 percent after the marketing authorization application for the antifungal isavuconazole (Cresemba) for invasive aspergillosis, which was submitted by the company's license partner Pfizer (PFE), has been accepted for regulatory review in China.

U.S. Economic Reports

Fist-time claims for U.S. unemployment benefits unexpectedly increased in the week ended November 21st, according to a report released by the Labor Department on Wednesday.

The report said initial jobless claims climbed to 778,000, an increase of 30,000 from the previous week's revised level of 748,000.

The increase surprised economists, who had expected jobless claims to drop to 730,000 from the 742,000 originally reported for the previous week.

Meanwhile, new orders for U.S. manufactured durable goods increased by more than expected in the month of October, the Commerce Department revealed in a report.

The Commerce Department said durable goods orders jumped by 1.3 percent in October after spiking by 2.1 percent in September. Economists had expected durable goods orders to climb by 0.9 percent.

Excluding an increase in orders for transportation equipment, durable goods orders still surged up by 1.3 percent in October after jumping by 1.5 percent in September. Ex-transportation orders were expected to rise by 0.4 percent.

A separate report released by the Commerce Department showed the spike in gross domestic product in the third quarter was unrevised from the initial estimate.

The Commerce Department said GDP skyrocketed by an annual rate of 33.1 percent in the third quarter after plunging by 31.4 percent in the second quarter. The unrevised reading on GDP matched economist estimates.

At 10 am ET, the Commerce Department is scheduled to release its report on new home sales in the month of October. New home sales are expected to jump by 1.5 percent in October after tumbling by 3.5 percent in September.

The Commerce Department is also due to release its report on personal income and spending in the month of October at 10 am ET. Personal income is expected to come in unchanged, while personal spending is expected to rise by 0.4 percent.

Also at 10 am ET, the University of Michigan is scheduled to release its revised reading on consumer sentiment in the month of November. The consumer sentiment index is expected to be unrevised at 77.0.

The Energy Information Administration is scheduled to due to release its report on oil inventories in the week ended November 20 at 10:30 am ET.

Crude oil inventories are expected to inch up by 0.1 million barrels after rising by 0.8 million barrels in the previous week.

At 2 pm ET, the Federal Reserve is due to release the minutes of its latest monetary policy meeting held earlier this month.

Stocks In Focus

Shares of Gap (GPS) are moving sharply lower in pre-market trading after the appeal retailer reported weaker than expected third quarter earnings.

Outerwear maker Canada Goose (GOOS) may also come under pressure after BTIG downgraded its rating on the company’s stock to Sell from Buy.

On the other hand, shares of HP Inc. (HPQ) are seeing significant pre-market strength after reporting better than expected fiscal fourth quarter results.

Department store chain Nordstrom (JWN) is also likely to move to the upside after reporting third quarter results that exceeded analyst estimates.
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