Light Trading May Lead To Lackluster Session To Close Out 2020

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Light Trading May Lead To Lackluster Session To Close Out 2020

The major U.S. index futures are pointing to a roughly flat open on Thursday, with stocks likely to show a lack of direction in early trading.

Traders may be reluctant to make significant moves on the final trading day of the year, with some likely to look to get a head start on New Year’s Eve celebrations.

Even with a lackluster session, the major averages are poised to post strong gains for 2020 despite the ongoing coronavirus pandemic.

Year-to-date, the Dow has jumped by 6.6 percent and the S&P 500 has surged up by 15.5 percent, while the tech-heavy Nasdaq has skyrocketed 43.4 percent.

The substantial gain by the Nasdaq comes as tech stocks benefited from the stay-at-home orders issued in response to the spread of the deadly coronavirus.

Most other sectors have also recovered from the sell-off seen as lockdowns were imposed, with optimism about a swift economic rebound driving the markets higher even as the death toll spikes.

Adding to the positive sentiment, the Labor Department released a report unexpectedly showing a modest drop in first-time claims for U.S. unemployment benefits in the week ended December 26th.

After an early move to the upside, stocks gave back some ground over the course of the trading session on Wednesday but managed to end the day modestly higher. With the uptick on the day, the Dow reached a new record closing high.

The Dow rose by nearly 190 points in morning trading but ended the session up just 73.89 points or 0.2 percent at 30,409.56. The Nasdaq edged up 19.78 points or 0.2 percent to 12,870.00 and the S&P 500 inched up 5.00 points or 0.1 percent to 3,732.04.

The early strength on Wall Street came as traders made another attempt at window dressing going into the end of the year after profit taking set in following an early advance on Tuesday.

News that U.K. regulators have approved a coronavirus vaccine developed by AstraZeneca (AZN) and the University of Oxford for emergency use also generated some positive sentiment.

Nonetheless, the upcoming New Year’s Day holiday on Friday kept overall trading activity relatively subdued.

Traders also kept an eye on developments in Washington, as lawmakers haggle over increasing stimulus checks to $2,000 from $600.

Senate Majority Leader Mitch McConnell, R-Ken., blocked Democratic efforts to fast-track a House approved measure to increase the size of the checks.

McConnell has instead proposed a bill that would tie the bigger stimulus checks to the repeal of a provision that protects social media platforms and the creation of an election fraud commission.

With Democrats likely to oppose the combined package, Senate Minority Leader Chuck Schumer, D-N.Y., described the move by McConnell as a “blatant attempt to deprive Americans of a $2,000 survival check.”

Political observers have suggested McConnell added the so-called “poison pill” to give cover to Georgia Senators seeking re-election in next week’s crucial run-offs.

On the U.S. economic front, the National Association of Realtors released a report showing a continued decrease in U.S. pending home sales in the month of November.

NAR said its pending home sales index slid 2.6 percent to 125.7 in November after falling by 0.9 percent to 129.1 in October. Economists had expected pending home sales to come in unchanged.

A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

Meanwhile, a separate report from MNI Indicators showed an unexpected acceleration in the pace of growth in Chicago-area business activity in the month of December.

Gold stocks moved sharply higher over the course of the session, driving the NYSE Arca Gold Bugs Index up by 2.5 percent. The rally by gold stocks came amid an increase by the price of the precious metal.

An increase by the price of crude oil also contributed to significant strength among energy stocks after data showed a bigger than expected weekly drop in crude oil inventories.

Reflecting the strength in the energy sector, the NYSE Arca Natural Gas Index surged up by 2 percent, while the Philadelphia Oil Service Index and the NYSE Arca Oil Index jumped by 1.9 percent and 1.8 percent, respectively.

Considerable strength was also visible among airline stocks, resulting in a 1.9 percent advance by the NYSE Arca Airline Index.

Semiconductor, steel and chemical stocks also saw notable strength on the day, moving higher along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are falling $0.47 to $47.93 a barrel after rising $0.40 to $48.40 a barrel on Wednesday. Meanwhile, after climbing $10.50 to $1,893.40 an ounce in the previous session, gold futures are advancing $8.30 to $1,901.70 an ounce.

On the currency front, the U.S. dollar is trading at 103.07 yen versus the 103.19 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.2283 compared to yesterday’s $1.2298.

Asia

Asian stocks turned in a mixed performance on Thursday, the last trading day of 2020, as investors booked profits amid thin holiday trading. Some of the regional markets were closed for New Year’s Eve, including Japan, South Korea, Indonesia, the Philippines and Thailand.

Chinese shares rose for a second straight day, while Hong Kong shares extended their winning streak to a third day in a shortened trading session.

The benchmark Shanghai Composite Index surged 58.62 points or 1.7 percent to 3,473.07. Hong Kong’s Hang Seng Index rose 84.02 points or 0.3 percent to 27,231.13, but ended the year with a loss of 3.4 percent.

Survey data from the National Bureau of Statistics showed that China’s manufacturing sector growth moderated at the end of the year.

The official manufacturing Purchasing Managers’ Index fell to 51.9 from 52.1 in November, while it was forecast to drop marginally to 52.0. However, a reading above 50 indicates expansion in the sector.

In Hong Kong, Geely Automobiles gained 8.4 percent, chipmaker Semiconductor Manufacturing International jumped 8.3 percent and Brilliance China Automotive climbed 7.3 percent.

Australian shares closed notably lower in an abbreviated session, extending losses from the previous day and ending the year with a loss of 1.5 percent.

An increase in the number of coronavirus cases in New South Wales and Victoria, Australia’s two most populous states, and strict restrictions imposed on New Year’s Eve celebrations prompted investors to book profits.

The benchmark S&P/ASX 200 Index tumbled 95.30 points or 1.4 percent to 6,587.10 and the broader All Ordinaries Index slumped 92.30 points or 1.3 percent to 6,850.60.

Among the major miners, Fortescue Metals lost 2.3 percent, while Rio Tinto and BHP Group slid 1.7 percent each.

In the banking sector, National Australia Bank, Commonwealth Bank, ANZ Banking and Westpac tumbled in a range of 1.5 percent to 1.9 percent.

New Zealand shares also ended lower for a second straight day, with the benchmark NZX 50 Index sliding 125.50 points or 1 percent to 13,091.64 on light trading volume. However, the market closed the year with a gain of more than 13 percent.

Shares of Meridian Energy tumbled 5.5 percent after the electricity generator received a notice from the market regulator earlier this week, seeking an explanation for a 20 percent increase in the company’s share price since December 21.

Europe

European stocks are exhibiting weakness in an abbreviated session on Thursday, with investors largely staying cautious and taking some profits amid a lack of positive triggers.

With many of the markets across the continent closed for New Year’s Eve, trading activity is quite subdued, resulting in thin volumes.

While the U.K.’s FTSE 100 Index has plunged by 1.5 percent, the French CAC 40 Index has slumped by 0.9 percent. Germany and Switzerland are closed for holidays.

Among other markets in Europe, Belgium, Ireland, Netherlands, Spain and Turkey are weak, while Greece and Portugal are slightly higher. All other markets in Europe are closed for New Year’s Eve.

In economic news, Turkey’s trade deficit widened sharply in November from last year on higher imports, the Turkish Statistical Institute reported Thursday.

The trade gap increased to $5.03 billion in November from $1.98 billion in the same period last year. Exports dropped 0.9 percent annually, while imports surged 15.9 percent in November.

U.S. Economic Reports

A report released by the Labor Department on Thursday showed a modest drop in first-time claims for U.S. unemployment benefits in the week ended December 26th.

The Labor Department said initial jobless claims edged down to 787,000, a decrease of 19,000 from the previous week’s revised level of 806,000.

The dip surprised economists, who had expected jobless claims to rise to 833,000 from the 803,000 originally reported for the previous month.

Stocks In Focus

Shares of Tribune Publishing (TPCO) are skyrocketing in pre-market trading after hedge fund Alden Global offered to acquire the shares of the media company that it does not already own for $14.25 per share.

Celsius Holdings (CELH) and e.l.f. Beauty (ELF) are also seeing significant pre-market strength on news the companies’ stocks will join the S&P SmallCap 600 effective prior to the start of trading on Thursday, January 7th.

On the other hand, shares of New York City REIT (NYC) may come under pressure after the real estate investment trust offered to buy up to 65,000 shares of the company’s class B common stock for $7 per share.

MacKenzie Capital Management previously offered to acquire up to 65,000 class B Shares of New York City REIT for $6.50 per share.

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