08 January 2021

Wall Street Hits Record Highs Ahead of NFP Report

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News shaping
the markets today

     

What’s happening: Wall Street stocks settled at fresh highs on Thursday after the US Congress confirmed Joe Biden as the next President of the country.

What happened: Markets shrugged off protests by supporters of President Donald Trump storming into the Capitol complex in Washington on Wednesday. Sentiment was lifted as Trump promised an orderly transition on January 20.

The all-important NFP (nonfarm payrolls) report will be in focus today, following yesterday’s weak ADP data showing a decline in private payrolls for December.

Why it matters: Trump’s supporters stormed into the US Capitol complex on Wednesday, as lawmakers began the formal process of counting votes to declare Joe Biden as the winner.

The Congress resumed the process after the Capitol complex was secured and later declared Biden’s victory over Trump in the Presidential election. Following the confirmation, Trump reassured of “an orderly transition on January 20th.”

Markets continued to focus on the prospects of further financial aid, with the Democrats securing a lead in Georgia’s Senate runoff elections, which gives the Democratic party full control of both chambers.

Investor sentiment was further lifted by encouraging economic data released on Thursday. The ISM (Institute for Supply Management) services index surprisingly rose to 57.2 in December, from the previous month’s reading of 55.9, despite the recent wave of covid-19 weighing heavily on the economy. Initial jobless claims also declined by 3,000 to 787,000 in the week ended January 2, much better than the expectations of 815,000.

The Dow Jones index jumped 211.73 points to close at 31,041.13, hitting new highs on Thursday. The 30-stock index had surged by more than 300 points earlier in the session. The S&P 500 added 1.5% to reach 3,803.79, notching its biggest single-day gain in terms of points and percentage since November 24, 2020. The index breached the 3,800 mark for the first time in history.

The Nasdaq 100 climbed by a whopping 2.6% to end the trading day at 13,067.48 with shares of Alphabet and Microsoft adding over 2%, and Apple’s stock climbing more than 3%. The tech-laden index recorded its first-ever close above 13,000 on Thursday.

Shares of Tesla jumped around 8% on Thursday, after analysts at RBC Capital Markets upgraded the stock to a Sector Perform rating, from Underperform. Walgreens Boots Alliance’s shares added more than 5% in the previous session, after the pharmacy retailer surpassed the consensus estimates for its fiscal first quarter.

What to watch: Investors will keep an eye on the jobs data, scheduled for release today. The US economy is expected to add merely 71,000 jobs in December, which would be the smallest employment gain since the recovery of the job markets in May, after reporting a record loss of 20.787 million jobs in April. The US unemployment rate is projected to increase to 6.8%, from November’s level of 6.7%.

Data on wholesale inventories will also be released today, with inventories expected to decline 0.1% in November, versus a 1.2% rise in October.

Markets will look forward to a smooth transition of power on January 20, which is likely to result in more fiscal aid for the economy suffering from the pandemic crisis.

The Markets Today

     

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

Context: The loonie traded lower versus the US dollar on Thursday, as the currency retreated from around three-year highs in the previous session.

Details: The US dollar recovered during yesterday’s session with the currency rising to its highest level in a week, as traders supporting the euro booked profits.

Meanwhile, Canada's trade deficit shrank to C$3.3 billion in November, versus a revised gap of C$3.7 billion in October, with a rise in exports and a decline in imports, according to Statistics Canada.

Crude oil, one of the Canada’s important exports, was supported by a decline in US inventories and Saudi Arabia’s unexpected decision to lower its output.

WTI crude oil futures gained 0.4% to reach $50.83 per barrel on Thursday, while US bond yields also rose on the prospects of further financial aid from a Democratic-controlled Congress.

With another wave of covid-19 spreading across the country, the province of Quebec announced plans on Wednesday to impose a curfew from Saturday to contain infections.

The CAD/USD forex pair traded down 0.1% to 1.2682 on Thursday, after hitting its highest level of 1.2626 since April 2018.

Canada’s government bond yields traded higher, with the 10-year rising 3.3 basis points to 0.791% on Thursday.

What to watch: Markets will focus on Canada’s jobs data scheduled for release today, which is expected to provide some insight into the economy’s health. The country’s economy is expected to shed 27,500 jobs in December, after adding 62,000 jobs in November. The unemployment rate is also projected to increase to 8.6%, from 8.5% in November.

Other Markets: European trading indices closed higher on Thursday, with the FTSE 100, German DAX 30 and French 40 up by 0.22%, 0.55% and 0.70%, 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, France’s industrial production, balance of trade, current account and household consumption expenditure, UK’s house price index, South Africa's manufacturing PMI and SACCI business confidence index, Eurozone’s unemployment rate, Italy's unemployment rate, Spain's industrial confidence indicator, Brazil’s industrial production, car production and new vehicle registrations, Mexico’s consumer confidence, auto exports and car output as well as the US Baker Hughes crude oil rigs and consumer credit.

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