09 April 2021

S&P 500 Notches Another High as Tech Shares Rally

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News shaping
the markets today

     

What’s happening: US stocks recorded gains on Thursday, with the S&P 500 hitting another record high.

What happened: Despite weaker-than-expected labour market data from the US, Wall Street shares rallied on Thursday against the backdrop of a retreat in bond yields.

President Joe Biden quelled some concerns around an increase in corporate taxes to fund his administration’s $2 trillion infrastructure plan, saying that he is willing to negotiate on the proposed tax hike.

Why it matters: The US Labor Department reported that around 744,000 people had filed for jobless benefits in the week ending April 3. This not only represented the second consecutive week of a rise in initial jobless claims, but also came in much higher than the consensus estimate of 694,000.

The disappointing data dampened bond yields for a second consecutive session. Yields on the 10-year US Treasury note declined to 1.628% on Thursday, down meaningfully from the 14-month high of 1.776% recorded in March.

The pullback in yields helped technology stocks record sharp gains, which sent the tech-heavy Nasdaq 100 to a seven-week high on Thursday. The index traded within 2% of its record closing on February 12.

Markets saw a drop in trading activity on Thursday, ahead of the earnings season scheduled to commence next week. This week has recorded three of the year’s lowest volume sessions.

At a virtual IMF event on Thursday, Federal Reserve Chair Jerome Powell said that the US economic rebound still had room to go and emphasized the central bank’s commitment to ensuring is more well-rounded.

Meanwhile, analysts boosted their projections for S&P 500 earnings for the first quarter to 24.2% growth, from the 21% estimate released on February 5.

The S&P 500 rose 0.4% to 4,097.17 on Thursday, notching a record close for a second straight session. The tech-laden Nasdaq 100 jumped 1.04% to settle at 13,758.50, with shares of Apple and Microsoft gaining more than 1% each. The Dow Jones index also added 57.31 points to close at 33,503.57.

What to watch: Investors await data on producer prices and wholesale inventories from the US. Producer prices for final demand, which rose 2.8% year-over-year in February, are expected to rise 3.8% in March. Analysts expect wholesale inventories to grow 0.5% in February, following a revised 1.4% increase in the prior month.

Traders will also continue monitoring Treasury yields, as lower yields provide support to the tech and growth shares.

The Markets Today

     

The Canadian dollar will be in focus today ahead of the jobs report.

Context: The Canadian dollar traded higher against the greenback on Thursday, recovering from its one-week low levels.

Details: Recent gains in oil prices lifted the medium-term projections for the loonie. Although US crude futures fell 0.3% to close at $59.60 per barrel on Thursday, prices remain around 80% higher than in November last year.

The CAD/USD was also supported by pressure on the greenback, with the US Labor Department releasing softer-than-expected jobless claims data. The US dollar index fell to a two-week low versus a basket of major peers.

Investors will be closely watching Canada's jobs report for March, scheduled for release later today, as this is considered a leading indicator of the Bank of Canada’s policy outlook. Given that the central bank has become more optimistic about the country’s economic growth, some experts expect the bank to lower bond purchases at its upcoming meeting on April 21.

Meanwhile, Ontario issued a one-month stay-at-home order as the country’s most populous province battles another wave of covid-19 infections.

Canadian government bond yields traded lower on Thursday, following the decline in US bond yields. The 10-year yield shed 3.3 basis points to reach 1.469%.

The CAD/USD forex pair settled at 1.2563 on Thursday. However, the pair pared some gains, losing around 0.1% this morning.

What to watch: Markets await data on employment change and unemployment rate from Canada. The Canadian economy, which added 259,000 jobs in February, is expected to add just 100,000 in March. The unemployment rate is projected to decline to 8% in March, from 8.2% in the previous month.

Rising covid-19 cases remain one of the top concerns for markets, with global infections surging past 133.7 million.

Other Markets: European trading indices closed higher on Thursday, with the FTSE 100, German DAX 30, French 40 and STOXX Europe 600 up by 0.83%, 0.17%, 0.57% and 0.58%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Germany's balance of trade, Industrial production and current account, South Africa’s foreign exchange reserves, France’s Industrial production, Spain's industrial production, UK’s Halifax house price index, Italy’s Retail sales, Mexico’s industrial production, India’s value of loans, value of deposits and foreign exchange reserves, Brazil's consumer price inflation, Russia’s foreign exchange reserves, current account and balance of trade as well as the US Baker Hughes crude oil rigs.

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