04 January 2021

Nasdaq Ends 2020 With Record 44% Surge

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News shaping
the markets today

     

What’s happening: US stocks closed at record highs on Thursday with the Nasdaq 100 adding a whopping 43.6% for the year.

What happened: The global financial markets remained highly volatile through 2020, with the pandemic causing significant uncertainties and triggering huge injections of funds from governments across the globe.

Despite the continued spike in covid-19 cases, Wall Street rebounded dramatically towards the end of the year, with major indices hitting record highs. Meanwhile, investors remained cautious about another variant of the coronavirus beginning to spread in some countries.

Why it matters: US equities declined sharply in February, as the covid-19 outbreak began spreading outside China, forcing governments to impose lockdown restrictions that resulted in supply disruptions and the closure of several businesses.

The S&P 500 recorded its fastest decline of 30% in history. US stocks started to recover in late March, after the Federal Reserve announced various measures to provide support to the credit markets. The stock market made record jumps with the rollout of covid-19 vaccines.

In 2020, the Nasdaq 100 recorded its strongest annual performance since 2009, with the pandemic forcing people to work and learn from home, which boosted demand for computers and cloud services.

While the Nasdaq 100 added close to 44% for the year, the S&P 500 rose 16.3% and the Dow Jones index ending 2020 with a 7.3% gain.

Consumer discretionary stocks surged strongly, adding more than 32% last year as more people started shopping online. The trend helped Amazon’s stock add more than 76% in 2020.

Although investors remained cautious amid light trading on Thursday, the S&P 500 and Dow Jones index climbed to all-time highs on the last trading day of the year.

Thursday’s surge came after the Labor Department reported better than expected data on weekly jobless claims. The number of Americans filing unemployment benefits declined for the first time in 2020 by 19,000 to 787,000 in the week ending December 26. Markets had been expecting a higher reading of 828,000.

The Dow Jones index surged 196.92 points, or 0.7%, to close at 30,606.48 in the prior session. The S&P 500 added 0.6% to reach 3,756.07, with the financials and utilities sectors gaining more than 1%. The tech-heavy Nasdaq 100 edged higher by 0.1% to settle at 12,888.28 on Thursday.

What to watch: Markets await data on manufacturing PMI and construction spending data from the US. The final reading of IHS Markit US manufacturing PMI is expected to decline slightly to 56.5 in December, versus 56.7 in November. Construction spending is projected to increase 0.9% in November, following a 1.3% rise in the prior month.

Investors may begin the first trading day of the new year on a cautious note, following Thursday’s spike. The downturn in US stock futures in the Asian session points towards a lower open on Wall Street today.

The Markets Today

     

The British pound will be in focus today with the UK exiting the EU’s single market and customs union.

Context: The sterling spiked to its highest level of the year versus the US dollar on Thursday, after the UK parliament approved the Brexit trade deal.

Details: The pound has been trading higher since Britain and the EU reached an agreement on Christmas Eve on their future trading relations. The signing of the trade deal put an end to growing concerns of Britain having to exit the EU on January 1 without a post-Brexit deal. The deal was approved by the British parliament on Wednesday.

The surge in the GBP/USD forex pair was also supported by weakness in the US dollar, which has been trading at multi-year lows due to the Federal Reserve’s monetary policy and the government’s stimulus plans to support the economy.

The GBP/USD added 0.3% to reach 1.3659 during light trading in London, while the pound also gained 0.9% versus the euro to reach 1.1171 on Thursday. While the sterling added more than 4% versus the US dollar in 2020, the euro gained around 6% versus the pound in the year.

What to watch: Markets await a basket of economic reports from the UK, including manufacturing PMI, consumer credit, mortgage lending and mortgage approvals. The IHS Markit/CIPS manufacturing PMI is likely to rise to 57.3 in December, versus November’s reading of 55.6.

Investors will continue to focus on the rising covid-19 cases, with total infections surpassing 2.6 million in the country.

Other Markets: European trading indices closed lower on Thursday, with the FTSE 100, French 40 and the STOXX Europe 600 down by 1.45%, 0.86% and 0.30%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Turkey’s inflation rate, manufacturing PMI and producer prices, Spain’s manufacturing PMI and new car sales, Italy’s manufacturing PMI, France’s manufacturing PMI and new car registrations, Germany’s manufacturing PMI, Eurozone’s manufacturing PMI, South Africa’s total vehicle sales, Brazil’s manufacturing PMI and balance of trade, Canada’s manufacturing PMI, Mexico’s manufacturing PMI as well as the OPEC and non-OPEC ministerial meeting.

 

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