Thursday, January 7, 2021

Dow Hits Record High on Georgia Election News

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News shaping
the markets today

     

What’s happening: The Dow Jones index delivered sharp gains on Wednesday, settling at a new record high as results from the Georgia runoff elections trickled in. However, volatility is expected in the coming days following riots at Capitol Hill last night. A mob of Trump supporters reportedly stormed the Capitol while Congress was certifying Joe Biden's election win, gaining access to both chambers and smashing windows.

What happened: Markets reacted positively to the Democrats being on course to gain control of the Senate after both its candidates took a lead in the highly awaited Senate race in Georgia.

The tech-laden Nasdaq 100 remained highly volatile during the trading session before ending in the red amid fears around more stringent regulations and higher taxes being imposed by the Democrats.

Why it matters: While the final result of the Georgia elections is not expected until later today, Democratic candidate Raphael Warnock reportedly defeated Republican challenger Kelly Loeffler in one of the Senate races in the state. Another Democrat candidate Jon Ossoff was also leading the other race against Republican David Perdue.

Markets recorded massive gains during the earlier part of the session with the Democrats looking to take control of the Senate. In case both Democrats win the elections, it would be a 50-50 tie in the Senate, with a tiebreaker vote by Vice President-elect Kamala Harris, which is expected to give the Democratic party control of the chamber. The Democrats controlling the House, Senate and White House will pave the way for the clearance of fresh covid-19 relief stimulus, boosting hopes of a sharper economic rebound.

Investors grew concerned and Wall Street stocks gave up gains as the day progressed, with news of Trump supporters storming into the Capitol complex just after lawmakers met to confirm Joe Biden as the next US President. Vice President Mike Pence was taken out of the Senate with the Capitol going into a lockdown after protestors entered the complex.

Market sentiment was also hurt by weak data from the ADP, which showed a decline in private payrolls for December. Private sector employment fell by 123,000 jobs last month, following a 304,000 gain in November. The latest reading came in much below the expectations of a rise of 88,000 jobs in December.

The Dow Jones index jumped 437.80 points to settle at 30,829.40 on Wednesday, notching another record closing high. The 30-stock index had surged more than 600 points earlier in the session. The S&P 500 gained 0.6% to end at 3,748.14, coming off an intraday record high.

The Nasdaq 100 declined 0.6% to close at 12,740.79 on Wednesday, amid concerns around increased regulatory scrutiny of tech stocks. Shares of Facebook and Amazon fell by more than 2% in the session.

What to watch: Markets will keep an eye on the outcome of the Georgia runoff elections, which will determine the fate of the country’s economic policies. Investors will also continue to monitor the covid-19 infections, with total cases exceeding 21.2 million in the US.

Investors also await a basket of economic data from the US, including Challenger job cuts, balance of trade, initial jobless claims and ISM non-manufacturing PMI. The US trade deficit is expected to widen to $65.2 billion in November, from $63.1 billion in October, while jobless claims are projected to increase to 800,000 in the latest week, from 787,000 in the week ended December 26. The ISM non-manufacturing PMI is expected to decline to 54.6 in December, from a reading of 55.9 in the prior month.

The Markets Today

     

Gold will be in focus today after recording sharp declines in the previous session.

Context: Gold futures shed more than 2% on Wednesday after hitting a two-month high in the previous session ahead of the outcome of the two runoff elections in Georgia.

Details: US bond yields rose sharply in yesterday’s session, with the 10-year Treasury yield note surging nearly 1.06%, recording its strongest level since March.

As a result, gold prices moved lower on Wednesday as a rise in bond yields is expected to undercut traders’ appetite for the safe-haven metal.

Traders were also closely monitoring the Georgia runoff elections for the Senate as a win for the Democrats is expected to provide a further boost to Treasury yields, which in turn may expert pressure on gold prices.

A decline in the US private sector employment provided some support to gold prices on Wednesday as private payrolls fell by 123,000 in December, according to the ADP report.

Gold prices for February delivery fell by 2.3% to close at $1,908.60 an ounce on Wednesday, after climbing to $1,962.50 earlier in the session. The yellow metal recorded slight gains in afternoon trading, after the Federal Reserve released minutes from its December meeting. Meanwhile, silver prices fell 2.2% to $27.042 an ounce.

What to watch: The Georgia runoff results will remain in focus as a win for the Democrats will result in an easier rollout of more debt by President-elect Joe Biden to achieve his economic policies. Gold futures recorded slight gains in the Asian session, with prices trading higher by 0.4% at $1,916 an ounce.

Other Markets: European trading indices closed higher on Wednesday, with the FTSE 100, German DAX 30 and French 40 up by 3.47%, 1.76% and 1.19%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Germany’s factory orders and construction PMI, China's foreign exchange reserves, Eurozone’s construction PMI, consumer confidence indicator, economic sentiment indicator, consumer prices, services confidence indicator, industry confidence indicator, consumer confidence price trends and retail trade, France’s construction PMI and retail sales, Italy’s construction PMI and consumer prices, UK’s construction PMI, Mexico’s annual inflation rate and monetary policy meeting minutes, Canada’s balance of trade and Ivey PMI as well as the US EIA’s natural gas stocks report.