Lack Of Progress On Stimulus May Weigh On Wall Street

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Lack Of Progress On Stimulus May Weigh On Wall Street

The major U.S. index futures are currently pointing to a lower open on Friday following the mixed performance seen in the previous session.

The downward momentum on Wall Street comes as lawmakers in Washington remain at an impasse over a new fiscal stimulus bill.

Traders have generally been optimistic about the eventual approval of another relief package, but the lack of a breakthrough may start to weigh on sentiment.

Despite prolonged negotiations, Republicans and Democrats remain at odds over issues such as aid for state and local governments and unemployment assistance.

Selling pressure may be somewhat subdued, however, as traders also react to upbeat news regarding a potential coronavirus vaccine.

On Thursday, an FDA advisory committee voted in support of the coronavirus vaccine developed by Pfizer (PFE) and BioNTech (BNTX).

FDA Commissioner Stephen Hahn subsequently said the agency will rapidly work toward finalization and issuance of an emergency use authorization.

Following the pullback seen over the course of Wednesday’s session, stocks turned in a mixed performance during trading on Thursday. The tech-heavy Nasdaq turned positive after seeing initial weakness, while the Dow and the S&P 500 closed modestly lower.

The major averages finished the day on opposite sides of the unchanged line. While the Nasdaq climbed 66.85 points or 0.5 percent to 12,405.81, the Dow dipped 69.55 points or 0.2 percent to 29,999.26 and the S&P 500 edged down 4.72 points or 0.1 percent to 3,668.10.

The mixed performance on Wall Street came as traders kept an eye on the latest developments in Washington amid lingering uncertainty about a new fiscal stimulus bill.

The House has passed a one-week funding bill to avoid a government shutdown, although lawmakers remain at a stalemate over coronavirus relief.

The impasse partly reflects a dispute between Republicans and Democrats over including aid for state and local governments.

Meanwhile, traders were also reacting to a Labor Department report showing a significant increase in first-time claims for U.S. unemployment benefits in the week ended December 5th.

The report said initial jobless claims jumped to 853,000, an increase of 137,000 from the previous week’s revised level of 716,000.

Economists had expected jobless claims to rise to 725,000 from the 712,000 originally reported for the previous week.

With the much bigger than expected increase, jobless claims reached their highest level since hitting 873,000 in the week ended September 19th.

A separate report released by the Labor Department showed a modest increase in U.S. consumer prices in the month of November.

The Labor Department said its consumer price index rose by 0.2 percent in November after coming in unchanged in October. The uptick in consumer prices matched economist estimates.

Excluding food and energy prices, core consumer prices still edged up by 0.2 percent in November after showing no change in the previous month. Economists had expected core prices to inch up by 0.1 percent.

Energy stocks showed a substantial move to the upside on the day, benefiting from a sharp increase by the price of crude oil.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index spiked by 4.2 percent, the NYSE Arca Natural Gas Index soared by 3.8 percent and the NYSE Arca Oil Index surged up by 3.4 percent.

Significant strength was also visible among steel stocks, as reflected by the 3.7 percent jump by the NYSE Arca Steel Index. The index reached a new two-year closing high.

Airline, computer hardware and biotechnology stocks also showed notable moves to the upside over the course of the session.

Commodity, Currency Markets

Crude oil futures are edging down $0.06 to $46.72 a barrel after jumping $1.26 to $46.78 a barrel on Thursday. Meanwhile, after slipping $1.10 to $1,837.40 an ounce in the previous session, gold futures are rising $5.10 to $1,842.50 an ounce.

On the currency front, the U.S. dollar is trading at 104.03 yen versus the 104.24 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.2126 compared to yesterday’s $1.2138.

Asia

Asian stocks ended mixed on Friday as optimism about coronavirus vaccine rollouts eclipsed concerns over a delay in U.S. stimulus and Brexit uncertainty.

Near-term U.S. fiscal stimulus appeared unlikely after Democrat House Speaker Nancy Pelosi suggested that negotiations could stretch on after Christmas if necessary.

On the Brexit front, British Prime Minister Boris Johnson said there was “a strong possibility” Britain and the European Union would fail to strike a trade deal.

Chinese shares ended notably lower on worries about policy tightening and concerns surrounding persistent Sino-U.S. tensions as the U.S. Federal Communications Commission began the process of revoking China Telecom’s authorization to operate in the United States.

The benchmark Shanghai Composite Index slid 26.08 points, or 0.8 percent, to 3,347.19, while Hong Kong’s Hang Seng Index rose 95.28 points, or 0.4 percent, to 26,505.87.

Japanese shares ended a tad lower as the yen edged up amid uncertainties over Brexit, U.S. stimulus and worries over surging Covid-19 cases. Tokyo reported 595 new cases of Covid-19 today, while the number of serious cases increased by eight from the previous day to 67.

Prime Minister Yoshihide Suga said the coronavirus situation in the country is tense, but he was not thinking of suspending the government travel subsidy program.

The Nikkei 225 Index dropped 103.72 points, or 0.4 percent, to 26,652.52 and posted its first weekly loss in six. The broader Topix closed 0.3 percent higher at 1.782.01.

Heavyweight SoftBank Group slumped 4.7 percent on profit taking after two days of strong gains on share buyback reports and the successful initial public offering of DoorDash.

Toyota Motor jumped 4.6 percent after the company unveiled a sleeker and longer-traveling version of Mirai, its hydrogen-powered car.

Australian markets fell, dragged down by gold miners and financials. The benchmark S&P/ASX 200 Index fell 40.50 points, or 0.6 percent, to 6,642.60,but posted a sixth weekly gain, supported by strong commodity prices on the back of vaccine optimism. The broader All Ordinaries Index ended down 30.70 points, or 0.4 percent, at 6,886.40.

Banks ANZ, Commonwealth and NAB fell around 1 percent, while Woodside Petroleum and Santos climbed around 3 percent after oil prices hit their highest level since March. Mining heavyweights BHP and Rio Tinto rose 0.8 percent and half a percent, respectively.

Biotechnology giant CSL tumbled 3.2 percent after shelving the University of Queensland vaccine project. Buy-now-pay-later firm Zip Co. advanced 1.9 percent after it announced a deal with social media giant Facebook.

IGO surged 25.3 percent after completing the institutional component of its entitlement offer and share placement.

Seoul stocks rebounded to post their longest streak of weekly gains since November 2019 after a government report showed the country’s exports during the first 10 days of December jumped 26.9 percent year-on-year, boosted by microchips amid improving global demand.

The benchmark Kospi climbed 23.60 points, or 0.9 percent, to 2,770.06. The index rose 1.4 percent for the week, marking its sixth straight weekly jump.

Europe

European stocks have fallen in cautious trading on Friday amid uncertainties over Brexit, stalled U.S. stimulus talks and worries over surging Covid-19 cases.

After months-long talks and with just three weeks to go until the end of the transition period, British Prime Minister Boris Johnson said there is now a “strong possibility” the U.K. will leave the EU without a deal.

Near-term U.S. fiscal stimulus appeared unlikely after Democrat House Speaker Nancy Pelosi suggested that negotiations could stretch on after Christmas if necessary.

Amid record daily increases in both coronavirus cases and deaths, calls are growing for tougher lockdown measures in Germany.

While the German DAX Index has tumbled by 1.5 percent, the French CAC 40 Index is down by 0.8 percent and the U.K.’s FTSE 100 Index is down by 0.6 percent.

Sanofi shares have slumped after the drug maker said its Covid-19 vaccine candidate developed with GlaxoSmithKline showed an insufficient immune response in clinical trials.

Lloyds Banking Group and Barclays have also tumbled after Bank of England Governor Andrew Bailey warned about how Britain’s exit from the EU will affect consumers from January 1.

Rolls-Royce Holdings is also posting a steep loss. The aircraft engine maker said it expects to end 2020 with net debt of £1.5-£2.0 billion after a cash outflow of £4.2 billion during the year.

Sweden’s Ericsson has also come under pressure after if filed a lawsuit against Samsung in the U.S. for non-compliance with FRAND commitments.

In economic news, the German economy is set to log a less severe contraction this year as the easing of Covid-19 containment measures boosted third quarter growth, Bundesbank said in its semi-annual report.

The economy is projected to shrink 5.5 percent this year instead of the 7.1 percent projected in June. The economic recovery is forecast to be interrupted in the final quarter of 2020 and in the first quarter of 2021 due to the resurgence of the pandemic.

“We expect the containment measures to be loosened gradually in spring 2021 thanks to medical advances and consumption opportunities to be taken again,” Bundesbank President Jens Weidmann, said.

U.S. Economic Reports

Producer prices in the U.S. edged slightly higher in the month of November, according to a report released by the Labor Department on Friday.

The Labor Department said its producer price index for final demand inched up by 0.1 percent in November after climbing by 0.3 percent in October. Economists had expected producer prices to rise by 0.2 percent.

Excluding food and energy prices, core producer prices still crept up by 0.1 percent in November, matching the uptick seen in October. Core prices were also expected to increase by 0.2 percent.

At 10 am ET, the University of Michigan is scheduled to release its preliminary report on consumer sentiment in the month of December. The consumer sentiment index is expected to slip to 76.5 in December from 76.9 in November.

Federal Reserve Vice Chair for Supervision Randal Quarles is due to speak on “Bank Supervision” before a virtual Federal Reserve Board, Harvard Law School, and Wharton School Conference at 12:40 pm ET.

Stocks In Focus

Shares of Nio (NIO) are seeing significant pre-market weakness after the China-based electric car maker announced plans to sell up to 69 million American depositary shares.

Chipmaker Qualcomm (QCOM) is also likely to come under pressure after a report from Bloomberg said Apple (AAPL) has started building its own cellular modem for future devices in a move that would replace components from Qualcomm.

Shares of Broadcom (AVGO) may also move to the downside after the chipmaker reported better than expected fiscal fourth quarter results but provided a cautious outlook.

On the other hand, shares of Disney (DIS) are moving sharply higher in pre-market trading after the entertainment giant forecast strong subscriber growth for Disney+ and announced an increase in the price of the streaming service.

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