Investors will be keeping an eye on US stocks today, with all three major indices recovering significantly yesterday. In fact, the Dow is now on track for its best week since 2011.
Context: US stocks closed higher on Wednesday, with the Federal Reserve and other central banks cutting interest rates to support their economies, and former Vice President Joe Biden taking the lead in securing the Democratic Party’s presidential nomination.
Details: The Dow jumped around 1,200 points on Wednesday, after having shed 800 points in the previous session. The index responded positively to the emergency rate cut decision by the Fed. The rally in stocks yesterday turned the Nasdaq 100 positive for the year, up 0.5% year to date. However, the Dow and S&P 500 are still down by around 5.1% and 3.1%, respectively, for the year.
The Dow spiked 4.5% to close at 27,090.86 on Wednesday. The S&P 500 climbed 4.2%, while the Nasdaq 100 gained 3.9%.
Joe Biden’s string of victories lifted healthcare stocks, with shares of United Health Group rising around 11%, Centene gaining more than 15% and Cigna closing 11% higher.
US lawmakers announced a deal to provide $8.3 billion in emergency funding to fight against the spread of the coronavirus in the country. The IMF also announced a $50 billion aid package for low income and emerging market countries to fight the COVID-19.
On the economic data front, ADP (Automatic Data Processing) reported an addition of 183,000 jobs by private sector employers. The ISM non-manufacturing gauge climbed to 57.3 in February, from 55.5 in January.
In corporate news, Abercrombie & Fitch’s shares climbed around 9% after the company reported better-than-expected quarterly earnings. Shares of Hewlett Packard Enterprise slipped around 3% due to the company’s downbeat first-quarter results.
Among commodities, April gold slipped 0.1% to close at $1,643 an ounce, while crude futures declined 0.9% to settle at $46.78 per barrel on Wednesday.
Why it matters: The rally in stocks could take a U-turn today. US stock futures are pointing towards a lower open this morning. Investors are awaiting key economic reports, including initial jobless claims and the all-important non-farm payroll report.
What to watch: US initial jobless claims, which increased by 8,000 to 219,000 in the week ended February 22, are expected to decline to 215,000 in the latest week. Analysts expect non-farm labour productivity to rise by an annualized 1.4% in the fourth quarter, versus a 0.2% drop in the earlier three-month period. Unit labour costs are likely to increase at an annualized 1.4% in the quarter. Preliminary estimates show a 0.1% decline in factory orders for January, versus a 1.8% rise in December.
Other Markets: Most European indices closed higher on Wednesday, with the FTSE 100, German 30 and French 40 up 1.45%, 1.19% and 1.33%, respectively.