Upward Momentum May Lead To Modest Strength On Wall Street

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Upward Momentum May Lead To Modest Strength On Wall Street

The major U.S. index futures are pointing to a modestly higher open on Thursday, although activity is likely to be subdued during a holiday-shortened session.

The markets may benefit from recent upward momentum, which propelled the major averages to new record highs last week.

Reports the U.K. and the European Union are closing in on a post-Brexit trade agreement may also generate early buying interest along.

The rollout of coronavirus vaccines has also propped up hopes that the economic recovery can gain momentum next year.

Nonetheless, many traders are likely to remain on the sidelines ahead of the Christmas weekend, with the markets scheduled to close at 1 pm ET.

Stocks moved higher for much of the trading session on Wednesday before coming under pressure going into the close. The major averages showed notable moves to the downside, but the Dow and the S&P 500 managed to remain in positive territory.

The major averages eventually ended the session mixed. While the Nasdaq fell 36.80 points or 0.3 percent to 12,771.11, the Dow rose 114.32 points or 0.4 percent to 30,129.83 and the S&P 500 inched up by 2.75 points or 0.1 percent to 3,690.01.

The late-day pullback on Wall Street may have reflected profit taking, as traders cashed in on some of this year’s gains ahead of the upcoming holidays.

Earlier in the day, stocks benefited from a positive reaction a slew of U.S. economic data, including a report from the Labor Department showing a significant pullback in first-time claims for unemployment benefits in the week ended December 19th.

The report said initial jobless claims slid to 803,000, a decrease of 89,000 from the previous week’s revised level of 892,000.

Economists had expected jobless claims to come in unchanged compared to the 885,000 originally reported for the previous week.

The unexpected pullback came after jobless claims reached their highest level since early September in the previous week.

The Commerce Department also released a report showing new orders for U.S. manufactured durable goods increased by more than expected in the month of November.

Buying interest was somewhat subdued, however, as separate reports from the Commerce Department showed steep drops in personal income and new home sales.

Uncertainty about a coronavirus relief package approved by Congress also led to cautious trading after President Donald Trump slammed the bill as a “disgrace” in a video posted on Twitter on Tuesday.

Trump called on Congress to amend the bill to increase the direct payments to individuals to $2,000 from $600 and “get rid of the wasteful and unnecessary items.”

Democrats expressed support for increasing the size of the direct payments, but the idea is likely to face resistance in the Republican-controlled Senate.

The stimulus is attached to a government spending bill that Trump needs to sign by Monday to avoid a government shutdown.

Airline stocks showed a significant rebound after moving sharply lower over the past few sessions, driving the NYSE Arca Airline Index up by 3.4 percent. The index bounced off its lowest closing level in a month.

An increase by the price of crude oil also contributed to a rebound by energy stocks. Reflecting the strength in the energy sector, the Philadelphia Oil Service Index soared by 3.4 percent, the NYSE Arca Oil Index surged up by 3.3 percent and the NYSE Arca Natural Gas Index shot up by 3.1 percent.

Banking stocks also showed a substantial move to the upside on the day, resulting in a 2.9 percent spike by the KBW Bank Index. The index reached its best closing level in nearly ten months.

Gold, steel and tobacco stocks also saw notable strength on the day, while some weakness was visible among software and housing stocks.

Commodity, Currency Markets

Crude oil futures are slipping $0.31 to $47.81 a barrel after jumping $1.10 to $48.12 a barrel on Wednesday. Meanwhile, after climbing $7.80 to $1,878.10 an ounce in the previous session, gold futures are inching up $0.40 to $1,878.50 an ounce.

On the currency front, the U.S. dollar is trading at 103.67 yen versus the 103.57 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.2193 compared to yesterday’s $1.2187.

Asia

Asian stocks rose broadly on Thursday amid renewed optimism about a potential Brexit deal and hopes for an economic recovery. Trading activity was subdued ahead of the Christmas break.

Chinese shares bucked the uptrend on reports of an antitrust investigation into Asia’s leading e-commerce company Alibaba. The benchmark Shanghai Composite Index dropped 19.21 points, or 0.6 percent, to 3,363.11, while Hong Kong’s Hang Seng Index edged up 0.2 percent to 26,386.56.

Japanese shares closed near a three-decade high after reports suggested that Britain and the European Union were on the cusp of striking a post-Brexit trade deal. The global Covid-19 vaccine rollout also buoyed hopes of an economic recovery.

The Nikkei 225 Index rose 144 points, or 0.5 percent, to 26,668.35, while the broader Topix closed 0.5 percent higher at 1,774.27.

Aeon rallied 3.5 percent to a record high after the retailer upwardly revised its earnings outlook for the year to February.

Heavy machinery maker IHI jumped 5.9 percent and Kawasaki Heavy Industries advanced 3.4 percent on a Nikkei report that Japan’s new zero emission strategy would target a massive increase in offshore wind power.

Meanwhile, Hino Motors plunged 12.4 percent after announcing it will halt its plants and postpone new-model vehicle sales in the U.S. and Canada.

SoftBank Group, the biggest shareholder of Alibaba Group Holding, declined 1.7 percent as China kicked off an investigation into alleged monopolistic practices at the Chinese e-commerce giant.

Australian markets eked out modest gains in pre-Christmas trade as record testing numbers and a drop in new community transmissions in New South Wales provided cause for optimism.

The benchmark S&P/ASX 200 Index rose 21.70 points, or 0.3 percent, to 6,664.80, while the broader All Ordinaries Index ended up 24.90 points, or 0.4 percent, at 6,917.50.

Energy stocks such as Beach Energy, Oil Search and Santos rose over 2 percent as oil extended overnight gains on a bullish inventory report and hopes for Britain and the EU to work out a trade deal.

Miners BHP, Fortescue Metals Group and Rio Tinto rose between 0.4 percent and 1.2 percent, while banks ANZ, Commonwealth and Westpac ended with modest losses.

BHP said that “independent tests” had been carried out on Samarco’s preparations before restarting operations.

New Zealand shares edged up slightly to close at a record high, with healthcare companies and financials pacing the gainers.

The benchmark NZX-50 index inched up 17.73 points, or 0.1 percent, to 13,037.94. Marine cargo handling company Napier Port Holdings surged 4.2 percent to a near two-week high.

Australian and New Zealand markets closed early today and will remain shut on Friday and Monday for Christmas and Boxing Day holidays.

Seoul stocks rose sharply after Prime Minister Chung Sye-kyun told a televised briefing the country has signed deals with Pfizer and Johnson & Johnson’s Janssen to import coronavirus vaccines for up to 16 million people.

The country is struggling to contain a third wave of the pandemic after reporting its second-highest daily tally of cases on Wednesday. The benchmark Kospi jumped 47.04 points, or 1.7 percent, to 2,806.86, breaching the 2,800 mark for the first time ever.

Market bellwether Samsung Electronics surged 5.3 percent, while No. 2 chipmaker SK Hynix advanced 1.7 percent.

Europe

European stocks saw modest strength during holiday-shortened trading on Thursday as the rollout of coronavirus vaccines propped up hopes that the economic recovery can gain momentum next year.

While Western nations accelerated vaccination programs, the European Union is preparing to kick off vaccinations across the bloc on Sunday.

Meanwhile, Brexit talks have taken place through the night and reports suggest that a trade deal is imminent just a week before the transition period ends.

A last minute hitch related to fishing has delayed the agreement and an announcement is expected later in the day, Irish Foreign Minister Simon Coveney reportedly said.

The pan-European STOXX 600 Index has crept up by 0.2 percent. The U.K.’s FTSE 100 Index also inched up by 0.1 percent, while the French CAC 40 Index edged down by 0.1 percent. The German markets were closed on the day.

Coral Products has moved sharply higher after it entered into a share purchase agreement for the conditional sale of Coral Products (Mouldings) Limited and Interpack Limited for an estimated initial net cash consideration of 7.9 million pounds to One51 ES Plastics.

Hargreaves Services has also jumped as it announced the sale of its entire inventory of specialty coal to its German Joint Venture, HRMS.

Meanwhile, BHP is moving lower. The mining giant said that Samarco, a joint venture between the company and Vale in Brazil, has met the licensing requirements to restart operations at its Germano complex in Minas Gerais and its Ubu complex in Espírito Santo, Brazil.

U.S. Economic Reports

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

Stocks In Focus

Shares of Altimmune (ALT) may come under pressure after the FDA issued a clinical hold on the biopharmaceutical company’s Investigational New Drug application for AdCOVID, a single-dose intranasal COVID-19 vaccine candidate.

Alibaba (BABA) is also likely to see initial weakness after China kicked off an investigation into alleged monopolistic practices at the Chinese e-commerce giant.

On the other hand, shares of Square (SQ) may see initial strength after report from Bloomberg said the digital payment company has held talks to acquire music streaming service Tidal.

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