Market Analysis

The major U.S. index futures are pointing to a higher open on Thursday, with stocks likely to add to the modest gains posted in the two previous sessions.

Optimism about additional fiscal stimulus may generate early buying interest, as President-elect Joe Biden is expected to unveil a major relief package later today.

A report from CNN citing two people briefed on the deliberations said the price tag for the package is expected to be in the ballpark of $2 trillion.

The package is expected to include an increase in direct payments to Americans as well as an extension of increased unemployment insurance and support for state and local governments.

The futures remained positive following the release of a report from the Labor Department showing initial jobless claims jumped to their highest level in over four months in the week ended January 9th.

Traders have recently viewed disappointing jobs data as a positive for the markets, as it could put further pressure on lawmakers to approve additional stimulus.

Stocks moved modestly higher during trading on Wednesday, adding to the slim gains posted on Tuesday. While the Dow ended the day nearly unchanged, the broader Nasdaq and S&P 500 moved to the upside.

The Nasdaq climbed 56.52 points or 0.4 percent to 13,128.95 and the S&P 500 rose 8.65 points or 0.2 percent to 3,809.84. Meanwhile, the Dow spent the day lingering near the unchanged line before closing down 8.22 points or less than a tenth of a percent at 13,128.95.

The higher close by the Nasdaq and the S&P 500 came as treasuries regained ground following recent weakness, leading to a drop in bond yields.

The yield on the benchmark ten-year note, which moves opposite of its price, fell by 5 basis points to 1.088 percent after ending the previous session at its highest closing level since mid-March.

The drop in treasury yields contributed to significant strength among interest rate sensitive stocks such as utilities and commercial real estate stocks.

Reflecting the strength in the sectors, the Dow Jones Utility Average surged up by 2 percent and the Dow Jones U.S. Real Estate Index advanced by 1.2 percent.

The tech-heavy Nasdaq benefited from a jump by shares of Intel (INTC) which spiked by 7 percent after announcing CEO Bob Swan is stepping down effective February 15th and will be replaced by VMWare (VMW) CEO Pat Gelsinger.

On the other hand, steel stocks moved sharply lower over the course of the session, dragging the NYSE Arca Steel Index down by 2.7 percent.

Energy, networking and gold stocks also saw notable weakness, partly offsetting the strength in the aforementioned sectors.

In U.S. economic news, the Labor Department released a report showing U.S. consumer prices increased in line with economist estimates in the month of December.

The report said the consumer price index rose by 0.4 percent in December after edging up by 0.2 percent in November. The price growth matched expectations.

The Labor Department said the advance by the consumer price index was driven by an 8.4 percent jump in gasoline prices, which accounted for more than 60 percent of the overall increase.

Excluding food and energy prices, the core consumer price index inched up by 0.1 percent in December after rising by 0.2 percent in November. The uptick in core prices also matched economist estimates.

Later in the day, the Federal Reserve released its Beige Book, a compilation of economic evidence from the twelve Fed districts.

The report said most Fed districts reported that economic activity increased modestly since the previous Beige Book period, although conditions remained varied.

Overall buying interest was somewhat subdued, as political uncertainty kept some traders on the sidelines as House Democrats prepared to impeach President Donald Trump for a second time.

Commodity, Currency Markets

Crude oil futures are sliding $0.57 to $52.34 a barrel after slipping $0.30 to $52.91 a barrel on Wednesday. Meanwhile, after climbing $10.70 to $1,854.90 an ounce in the previous session, gold futures are slumping $16.70 to $1,838.20 an ounce.

On the currency front, the U.S. dollar is trading at 104.06 yen versus the 103.89 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.2119 compared to yesterday’s $1.2157.

Asia

Asian stocks ended mostly higher on Thursday as investors looked past the impeachment of U.S. President Donald Trump to focus on the new fiscal stimulus expected under the Biden Administration. Positive Chinese trade data also offered some support.

Chinese shares fell on profit taking after recent gains on optimism about an improving economic outlook and expectations of easy monetary policy.

The benchmark Shanghai Composite Index ended down 32.75 points, or 0.9 percent, at 3,565.90, while Hong Kong's Hang Seng Index advanced 261.26 points, or 0.9 percent, to 28,496.86.

China's exports continued to log robust growth in December, driven by higher global demand for pandemic-induced goods, official data revealed today.

Exports grew 18.1 percent on a yearly basis in December, faster than the expected growth of 15.0 percent. Nonetheless, the rate of growth slowed from 21.1 percent in November.

Import growth advanced to 6.5 percent from 4.5 percent a month ago. This was also faster than economists' forecast of 5.0 percent.

As a result, the trade surplus increased to $78.17 billion from $75.4 billion in the previous month. Economists had forecast the surplus to fall to $72.4 billion.

Japanese shares rose for the fifty day to close at a fresh 30-year high after data showed core machinery orders from domestic users excluding shipbuilders and power equipment makers improved for the second consecutive month in November.

The value of core machine orders rose a seasonally adjusted 1.5 percent sequentially in November - beating forecasts for a decline of 6.2 percent following the 17.1 percent spike in October.

On a yearly basis, core machine orders were down 11.3 percent - but that also beat forecasts for a fall of 15.4 percent following the 2.8 percent gain in the previous month.

The Nikkei 225 Index climbed 241.67 points, or 0.9 percent, to 28,698.26, marking its highest closing level since Aug. 3, 1990. The broader Topix closed 0.5 percent higher at 1,873.28.

Market heavyweight SoftBank Group climbed 2.9 percent and Fast Retailing added 1.7 percent. Nikon Corp. surged 7.2 percent, Yaskawa Electric jumped 5.3 percent and Daiwa Securities Group gained 2.3 percent.

Australian markets eked out modest gains ahead of U.S. stimulus unveiling. The benchmark S&P/ASX 200 Index rose 28.70 points, or 0.4 percent, to 6,715.30, while the broader All Ordinaries Index ended up 28.80 points, or 0.4 percent, at 6,982.70.

Tech stocks snapped a three-day losing streak, with buy-now-pay-later firm Afterpay soaring by 9.7 percent.

Banks ANZ, NAB and Westpac rose 1-2 percent, while mining heavyweights BHP and Rio Tinto gave up 0.4 percent and 0.9 percent, respectively.

Gold miners Evolution Mining, Newcrest, Northern Star Resources and Regis Resources moved to the downside on the day.

On the economic front, official data showed the total number of building permits issued in Australia advanced a seasonally adjusted 2.6 percent month-on-month in November, coming in at 17,205. That was in line with expectations following the 3.8 percent increase in October.

Seoul stocks ended on a flat note as chipmakers and automakers fell on valuation concerns. The benchmark Kospi edged up 1.64 points, or 0.1 percent, to 3,149.93. SK Hynix lost 1.9 percent and Hyundai Motor slumped 3.3 percent.

Europe

European stocks have edged higher on Thursday, extending gains for the third straight session as positive Chinese trade data and hopes of a large stimulus under the Biden administration helped outweigh concerns over rising Covid-19 infections and the resultant lockdowns.

Investors shrugged off the first calculation from Destatis showing that the German economy suffered a deep recession after a ten-year growth period.

GDP fell 5 percent in 2020, in contrast to the 0.6 percent rise seen in 2019. However, the economic downturn was less serious than in 2009, when GDP slid 5.7 percent.

In calendar-adjusted terms, GDP was down 5.3 percent versus a 0.6 percent rise in the previous year.

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

German automotive parts supplier HELLA GmbH & Co. KGaA has moved higher after posting strong second-quarter results.

Wind turbine manufacturer Nordex Group has also risen. The company said that it received an order for its N163/5.X turbines of the Delta4000 series about 131 MW in Sweden, at the end of 2020.

ASML Holding and ASM International have also shown strong moves to the upside after Barclays boosted its price target on the stocks.

Shares of Centrica has also rallied after the British energy and services company said it currently expects to report 2020 full year adjusted earnings per share from continuing and discontinued operations ahead of current market consensus.

Premier Inn-owner Whitbread has also jumped. After reporting a sharp drop in total sales for the third quarter of fiscal 2021, the company said its strong balance sheet provides the opportunity to take full advantage of the enhanced structural opportunities that are already visible in the market.

Meanwhile, Geberit, which makes bathroom ceramics, has moved to the downside. The Swiss company said a stronger franc stripped out 136 million Swiss francs ($153.15 million) from its sales during 2020.

Carrefour shares have plunged after the French government signaled initial opposition to Canadian convenience-store operator Alimentation Couche-Tard Inc. buying the company.

Groupe Renault has also fallen. The automaker increased its cost-savings target and plans to reduce vehicle productions to focus on electric vehicles.

Homebuilder Taylor Wimpey has also moved to the downside after reporting a drop in sales in the second quarter of the year.

U.S. Economic Reports

First-time claims for U.S. unemployment benefits climbed by much more than expected in the week ended January 9th, according to a report released by the Labor Department on Thursday.

The report said initial jobless claims rose to 965,000, an increase of 181,000 from the previous week’s revised level of 784,000.

Economists had expected jobless claims to inch up to 795,000 from the 787,000 originally reported for the previous week.

With the bigger than expected increase, jobless claims reached their highest level since hitting 1.011 million in the week ended August 22nd.

A separate report released by the Labor Department showed U.S. import and export prices both increased by more than expected in the month of December.

The Labor Department said import prices climbed by 0.9 percent in December after edging up by a revised 0.2 percent in November.

Economists had expected import prices to rise by 0.6 percent compared to the 0.1 percent uptick originally reported for the previous month.

The report said export prices also jumped by 1.1 percent in December following a revised 0.7 percent advance in November.

Export prices were expected to climb by 0.5 percent compared to the 0.6 percent increase originally reported for the previous month.

At 9 am ET, Boston Federal Reserve President Eric Rosengren is due to speak before virtual Boston Business Journal “Recover Boston: The Road Ahead - Economic Issues in 2021” via Zoom.

Atlanta Federal Reserve President Raphael Bostic is scheduled to moderate a "Small Business Recovery" panel and give closing remarks before a virtual Inclusive Recovery Series event at 11 am ET.

Also at 11 am ET, the Treasury Department is due to announce the details of this month’s auction of twenty-year bonds.

Federal Reserve Chair Jerome Powell is scheduled to participate in a conversation before a virtual event hosted by the Princeton University Bendheim Center for Finance at 12:30 pm ET.

At 1 pm ET, Dallas Federal Reserve President Robert Kaplan is due to participate in moderated question-and-answer session before a virtual 2021 Texas McCombs Business Outlook Series hosted by the University of Texas at Austin.

Stocks In Focus

Shares of Signet Jewelers (SIG) are moving higher in pre-market trading after the jewelry retailer reported strong holiday sales and forecast fourth quarter sales above analyst estimates.

Delta Air Lines (DAL) may also move to the upside after the airline reported a wider than expected fourth quarter loss but CEO Ed Bastian said he is optimistic 2021 will be a “year of recovery.”

Meanwhile, shares of Nordstrom (JWN) are likely to come under pressure after the department store operator reported disappointing holiday sales.