08 March 2021

US Stock Futures Dip Despite Progress on Stimulus

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News shaping
the markets today

     

What’s happening: US stock futures traded mostly lower this morning, despite the Senate clearing the massive $1.9 trillion stimulus package.

What happened: Wall Street stocks had spiked on Friday with an easing in bond yields and jobs data lifting sentiment amid hopes of a faster economic rebound.

After gaining more than 100 points on Sunday evening, Dow futures pared most of their gains this morning despite the $1.9 trillion covid-19 relief bill moving a step closer to being passed.

Why it matters: US indices rebounded sharply off their lows on Friday, as Treasury yields pared some gains. The 10-year Treasury yield fell to 1.55% after climbing above the 1.6% mark to a 2021 high. The easing in yields followed a strong jobs report.

The Labor Department reported a 379,000 rise in nonfarm payrolls in February, with the unemployment rate declining to 6.2%. This was much better than the expectations of 210,000 in new job additions, with the unemployment rate remaining steady at 6.3%.

“Yields ticked down from the move earlier, and that helped underpin the market’s climb higher…As tech names were moving into correction territory, by most measures the tech sell-off had reached oversold levels and were due for investors and traders to begin buying,” said Quincy Krosby, chief market strategist at Prudential Financial.

The Dow Jones index jumped 572.16 points to close at 31,496.30 on Friday, after shedding around 150 points earlier in the session. After falling 1% earlier, the S&P 500 settled higher by 2% at 3,841.94, while the Nasdaq 100 climbed 1.6% to reach 12,668.51.

Despite the sharp recovery on Friday, the Nasdaq 100 ended the week 1.9% lower. The S&P 500 added 0.8% to end a two-week losing streak. The 30-stock Dow Jones index was the standout performer, adding 1.8% last week with investors buying stocks of companies that would benefit from an economic recovery.

After several political manoeuvring, the Senate cleared the massive $1.9 trillion covid-19 rescue plan on Saturday, which includes the extension of jobless benefits, the distribution of stimulus cheques, state aids and more.

The bill is likely to be passed by the Democrat-controlled House later this week, with President Joe Biden expected to sign it into law before the expiry of the current jobless aid program on March 14.

What to watch: Markets will keep an eye on the developments around the stimulus package. Investors also await data on wholesale inventories, which is expected to rise 1.3% in January, following 0.5% growth in December.

US markets could remain cautious today, given the high volatility in futures trading this morning, which knocked off 100 points from the Nasdaq 100.

The Markets Today

     

Gold will be in focus today, after settling below the $1,700 mark last week.

Context: Gold futures settled slightly lower on Friday, with the safe-haven metal remaining in the red for the third consecutive week.

Details: The greenback recorded gains on Friday, sending the US dollar index to 92.192, its highest in more than three months. Meanwhile, the 10-year US Treasury note traded around 1.55% on Friday, after hitting 1.612% earlier in the session.

Both strength in the US dollar and high bond yields make gold less attractive for traders looking for a safe-haven asset.

On Friday, gold for April delivery fell 0.1% to close at $1,698.50 an ounce on the COMEX, after shedding 0.9% on Thursday. Friday’s close was the lowest for the precious metal since June 5, 2020.

Silver prices for May delivery also declined 0.7% to settle at $25.287 an ounce on Friday, following a 3.5% downturn in the previous session.

For the week, the yellow metal recorded a 1.8% decline, while the white metal shed 4.5%.

What to watch: Gold prices rebounded slightly this morning after hitting a multi-month low on Friday. The yellow metal was supported by some weakness in the greenback this morning due to the covid-19 stimulus package coming a step closer to being approved by the US government. The passing of this bill could boost gold’s appeal as a hedge against inflation. Gold futures traded 0.2% higher to $1,702 this morning.

Rising covid-19 cases remain a top concern for investors, with total global infections climbing past 116.8 million.

Other Markets: European trading indices closed lower on Friday, with the FTSE 100, German DAX 30, French 40 and Europe’s STOXX 600 down by 0.31%, 0.96%, 0.82% and 0.78%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Germany’s industrial production, Spain's industrial production, South Africa's SACCI business confidence index, Central Bank of Brazil’s focus market readout, Mexico’s consumer confidence indicator as well as the US consumer inflation expectations.

 

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