26 March 2021

Dow Jumps Around 200 Points as Markets Rebound

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News shaping
the markets today

     

What’s happening: US stocks closed higher on Thursday, staging a late session rebound from a two-day downturn.

What happened: Wall Street opened on a cautious note on Thursday, following remarks from Federal Reserve Chairman Jerome Powell around gradually removing stimulus.

However, an upbeat reading on weekly jobless claims helped markets turn positive in the final hour of trading.

Why it matters: Wall Street saw some weakness during the start of the session after the Fed chief suggested removing the fiscal stimulus.

“As we make substantial further progress toward our goals, we’ll gradually roll back the amount of Treasurys and mortgage-backed securities we’ve bought,” Powell said. “We will very gradually over time and with great transparency, when the economy has all but fully recovered, we will be pulling back the support that we provided during emergency times.”

Investors recently have been taking profits in growth stocks, which had spiked last year amid the pandemic. Shares of Netflix has lost around 7% this month, while Tesla’s stock is down more than 5% and Zoom Video’s shares have tumbled close to 16%.

Stocks benefitting from the reopening of the economy, such as travel-related shares, led the late-session rebound on Thursday. Shares of American Airlines and United Airlines added over 4% each, while Boeing’s stock gained more than 3%

A better-than-expected report on jobless claims boosted market sentiment, with first-time claims for unemployment benefits falling to 684,000 in the week ended March 20. The figure came in much better than the consensus estimate of 735,000 claims. The US economy also expanded an annualised rate of 4.3% in the fourth quarter, better than expectations of 4.1% growth.

Yields on the 10-year Treasury note rose just 1 basis point to 1.64%, after climbing to a 14-month high above 1.7% last week.

The Dow Jones index surged 199.42 points to close at 32,619.48 on Thursday, after dipping around 348 points earlier in the session. The S&P 500 added 0.5% to settle at 3,909.52, after recording a 0.9% intraday loss. However, the Nasdaq 100 slipped 0.14% to close at 12,780.51, with some major technology shares posting losses.

What to watch: Markets await a basket of economic reports from the US, including personal income, personal spending, goods trade balance, wholesale inventories, University of Michigan's consumer sentiment and personal consumption expenditure price index.

Personal income in the US is expected to decline 7.3% in February, following a 10% surge in January, while spending is projected to decline 0.7%. The core PCE price index, which rose 0.3% in January, is expected to increase 0.1% in February. Analysts expect the University of Michigan's consumer sentiment index to rise to 83.6 in March, from 76.8 in February.

The Markets Today

     

The Canadian dollar will be in focus today, ahead of the budget balance report.

Context: The Canadian dollar traded lower on Thursday, falling to a two-week low versus the US dollar.

Details: The loonie came under pressure, following a decline in oil prices and Canada's long-term bond yields falling below the US.

Canada's 10-year yield declined to 1.451%, retreating from a 14-month peak of 1.677% reached last Thursday. However, the spread between Canada’s and America’s 10-year yield widened further by 2.3 basis points to approximately 16 basis points.

"It's probably corresponding with the rates story," HSBC Bank Canada’s Andrew Cherry said in a note. "That differential may be a little bit to explain the weakness in the Canadian dollar."

Meanwhile, the US dollar surged to a new four-month high, with a decline in investor risk appetite. Prices of crude oil, one of Canada’s major exports, remained under pressure on concerns over renewed lockdowns in Europe. US crude oil futures dipped 4.3% to settle at $58.56 per barrel on Thursday.

Investors shrugged of a surge in Canada’s small business sentiment to 68.2 in March, from 62.5 in February. With this, the index reached its strongest level in around 10 years.

With investors remaining concerned about declining oil prices and falling bond yields, the CAD/USD hit its lowest level since March 10 at 1.2628.

What to watch: Markets await economic data on Canada’s budget balance. The government had reported a deficit of C$16.2 billion in December, versus a C$0.8 billion surplus in year-ago period.

Investors will also keep an eye on announcements by Bank of Canada, with some strategists suggesting the central bank may lower bond purchases next month.

Rising covid-19 cases remain one of the top concerns for markets, with total global infections surging past 125.4 million.

Other Markets: European trading indices closed mixed on Thursday, with the FTSE 100 and STOXX Europe 600 Index down by 0.57% and 0.07%, while the German DAX 30 and French 40 added 0.08% and 0.09%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Turkey’s business confidence and capacity utilization, UK’s retail sales and car production, Spain's GDP, Germany’s Ifo business climate indicator, Italy's manufacturing confidence index and consumer confidence index, India’s foreign exchange reserves, Mexico's balance of trade, Brazil's current account and foreign direct investment, Russia’s business confidence and corporate profits, Argentina's balance of trade as well as the US Baker Hughes crude oil rigs.

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