20 January 2021

Wall Street in Focus Ahead of Biden’s Inauguration Day

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News shaping
the markets today

     

What’s happening: Wall Street stocks spiked on Tuesday, ahead of the inauguration ceremony of President-elect Joe Biden scheduled for later today.

What happened: US stocks started off a holiday-shortened week on an upbeat note on Tuesday, while the greenback retreated from a five-week high level a day before the incoming President’s inauguration ceremony.

Investors also focussed on the testimony from US Treasury Secretary nominee Janet Yellen, while covid-19 cases continued to rise in the country.

Why it matters: The three main US indices recorded gains on Tuesday, reversing last week’s trend, when stocks ran out of steam after a strong start to 2021. Investors remain concerned, however, around how much US stocks can rise while covid-19 cases continue to increase across the country.

Meanwhile, investors are preparing for the new President to take centre stage today and look forward to his speech, which is expected to discuss his approach to the economic crisis and health issues. Biden recently announced plans to rollout 100 million covid-19 vaccines during his initial 100 days, increasing the pace of the ongoing vaccination drive.

The inauguration ceremony is scheduled to take place at the Lincoln Memorial Reflecting Pool as a dialled down event because of the current pandemic situation. Joe Biden will become the 46th President of the country after the swearing-in ceremony, while Kamala Harris will become the first woman Vice President of the United States. The event will take place amid heightened safety concerns following the attack on Capitol Hill by Donald Trump’s supporters.

US stocks have been on an uptrend this year, on enthusiasm around an economic recovery as the new Biden administration is expected to announce more stimulus to revive the economy. During the testimony on Tuesday, Yellen fuelled the enthusiasm by saying that the country needs further fiscal stimulus to avert an economic recession.

The Dow Jones index added 116 points to close at 30,930.52, while the S&P 500 gained 0.81% to reach 3,798.91. The Nasdaq 100 moved sharply higher, adding 1.5% to end the trading day at 12,996.54.

While stocks responded positively, the dollar index retreated from a five-week high following comments from Yellen, who is set to replace Treasury Secretary Steven Mnuchin. The index, which measures the greenback’s performance versus a basket of major rivals, declined to 90.5 on Tuesday. Both the EUR/USD and GBP/USD forex pairs recorded gains on Tuesday mainly due to weakness in the greenback.

What to watch: Investors will be tuned into Biden’s speech on economic and health issues. Markets look forward to gaining clarity on the recent hype around sharp corporate tax hikes. The speech will also provide details of the recently announced relief package of $1.9 trillion.

US stock futures traded mixed this morning, as investors remained cautious ahead of the all-important inauguration day and rising coronavirus cases. However, the greenback continued its decline during the Asian session.

The Markets Today

     

The Canadian dollar will be in focus today ahead of the interest rate decision from the Bank of Canada.

Context: The CAD/USD forex pair traded higher on Tuesday, recovering from a one-week low in the previous session.

Details: Improved prospects of a fiscal stimulus in the US lifted trader sentiment, providing support to the loonie in Tuesday’s session.

The Canadian dollar was also buoyed by a rise in crude prices on Tuesday, as oil is one of Canada’s major exports. Crude oil futures climbed more than 1% to $52.98 a barrel yesterday, as markets remained optimistic about the US government’s stimulus boosting global economic growth and, consequently, the demand for oil.

Oil prices remained elevated despites the IEA (International Energy Administration) lowering its outlook for global oil demand by 300,000 bpd (barrels per day) for 2021.

The CAD/USD was also supported by weakness in the US dollar, following the speech by Biden's nominee for Treasury Secretary, Janet Yellen.

On the economic data front, Canadian manufacturing sales fell 0.6% to C$53.7 billion in November, recording the first decline in three months, due to lower sales of aerospace products and parts. However, wholesale sales grew 0.7% to an all-time high of C$67.4 billion in November.

The CAD/USD forex pair added 0.2% to trade at 1.2712 this morning, after closing yesterday’s session at 1.2736.

What to watch: Markets will keep an eye on Canada's consumer price inflation and the Bank of Canada’s interest rate decision. The consumer price index is expected to remain flat in December and the central bank is likely to leave its interest rate unchanged at a record low of 0.25% during its latest meeting.

Rising covid-19 cases remain in focus, with total worldwide cases surpassing 96.1 million.

Other Markets: Asian indices traded mostly higher on Wednesday, with the China’s Shanghai Composite Index and Hong Kong’s Hang Seng Index up by 0.01% and 0.26%, respectively. However, Japan’s Nikkei 225 declined by 0.6% this morning.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Germany’s producer prices, UK’s consumer prices, producer prices and retail price inflation, South Africa’s annual inflation rate, Eurozone’s consumer prices, Turkey’s government debt, China’s foreign direct investment as well as the US MBA mortgage applications, Redbook index, NAHB housing market index.

 

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