19 August 2020

US Stocks Reach Record Highs Despite Ongoing Concerns

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News shaping
the markets today

     

What’s happening: US stocks traded mostly higher on Tuesday, with the S&P 500 and Nasdaq 100 closing at record levels.

What happened: Various stock markets around the world, mainly in China and Japan, are still a long way from their all-time highs.

Despite various concerns around rising infections, delays in the government’s relief package and re-imposition of restrictions, major US stock indices surged to their peaks on Tuesday.

Why it matters: There seems to be no stopping the rise in Wall Street stocks. Despite the US facing multiple concerns, being the hotspot of covid-19 infections and deaths, the country’s major indices hit all-time highs on Tuesday.

China’s major index, the Shanghai Composite is down more than 40% from its peak level seen in 2007, while the stock markets in Japan have also lost ground amid the pandemic, trading around 40% lower than the record highs witnessed way back in 1989.

Meanwhile, US stocks were driven yesterday by some strong earnings reports released by major companies. Both Walmart and Home Depot reported better-than-expected results for the latest quarter. Shares of Oracle closed higher by more than 2%, after news of the company being in talks to acquire TikTok’s US business. Tesla’s stock notched a fifth consecutive day of gain, closing higher by around 3%.

In economic data, US housing starts climbed 22.6% in July, while building permits surged 18.8% from June’s levels.

The S&P 500 index, which tracks several of the country’s biggest companies, rose 0.2% to close at 3,389.78 on Tuesday, reaching its first record high closing since February 19. Despite concerns over political chaos in the US, a delay in the new fiscal stimulus and the state of the economy, the S&P 500 index has made the fastest turnaround from the bear-market zone.

The Nasdaq 100 climbed around 82 points to close at 11,210.84, reaching its 34th all-time high for the year. The Dow Jones index declined, however, by 0.2% to settle at 27,778.07, following a 0.3% decline on Monday.

What to watch: Investors await the release of the FOMC (Federal Open Market Committee) minutes from the latest meeting, which are expected to provide details of the strategies suggested by the Federal Reserve to help the country’s economy recover from the coronavirus-led crisis.

Markets will continue to monitor the covid-19 numbers, with total cases in the US surpassing 5.4 million.

The Markets Today

     

Crude oil will be in focus today, ahead of the EIA’s (Energy Information Administration) data on crude inventories and an OPEC+ (Organization of the Petroleum Exporting Countries and its allies) panel meeting scheduled for later in the day.

Context: Crude oil remained within a tight range on Tuesday, after gaining some ground in the previous session, driven by reports of OPEC+ members complying with output cuts.

Details: Beginning this month, the OPEC+ members started scaling back production cuts from 9.7 million bpd (barrels per day) to 7.7 million bpd.

The Joint Ministerial Monitoring Committee (JMMC) of the OPEC+ group, which provides recommendations on production, is unlikely to make any major announcement today, as the members have exhibited high compliance levels so far.

Late Tuesday, the API (American Petroleum Institute) reported a draw of 4.264 million barrels in crude oil inventories for the week ending August 14.

WTI (West Texas Intermediate) crude for September delivery settled mostly flat at $42.89 per barrel on the NYMEX (New York Mercantile Exchange) on Tuesday. October Brent crude rose 0.2% to end the trading day at $45.56 per barrel on the ICE Futures Europe.

September natural gas gained 3.3% to end at $2.417 per million British thermal units on Tuesday.

What to watch: Traders await the EIA’s report on crude oil stockpiles and the OPEC’s panel meeting. Analysts expect US crude supplies to have declined 3.8 million barrels last week. Gasoline stocks are projected to drop 2 million barrels, while distillate supplies are expected to decline 900,000 barrels.

Other Markets: European indices were trading lower at 8:30am GMT, with the FTSE 100, French 40 and Dax 30 index down by 0.3% each.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Canada’s inflation rate and wholesale sales, Argentina’s leading economic index as well as the US MBA mortgage applications.