US equities open marginally higher. US stocks opened little changed this morning following a mixed close Wednesday. Market participants are keeping an eye on Washington efforts on more fiscal stimulus.
- Energy rebounded Wednesday on positive comments concerning today’s OPEC meeting.
- Communication services outperformed given strength in media and internet names.
- Consumer discretionary and staple names were relatively weak during Wednesday’s session.
- Asian equities ended their session mostly higher.
- European equities are mostly lower during midday trading.
Jobless claims fall more than anticipated. Initial jobless claims fell to 712,000, below Bloomberg consensus forecasts of 775,000, and lower than the prior week’s 778,000 (source: US Department of Labor). Continuing claims also fell, declining to 5.52 million and below the Bloomberg consensus estimate for 5.80 million. The drop in claims from the prior week is the largest since the first week of October, but claims may rebound next week due to holiday distortions.
Beige Book shows regional weakness. In the most recent Federal Reserve Beige Book, survey respondents noted how rising COVID-19 cases in the Midwest have already begun to take their toll on economic activity. While the economy is still growing at a modest pace, the Beige Book confirms our belief that the recent rise in cases poses a threat to the recovery. Read today’s LPL Research blog.
Global stock valuations. Stock valuations outside the United States—particularly in emerging markets—still look very attractive despite recent outperformance. On a forward price-to-earnings basis, international developed market equities, based on the MSCI EAFE, are trading at a 19% discount to the S&P 500 Index (20-year average is 8%). Emerging market equities, based on the MSCI Emerging Markets Index are trading at a 31% discount to the S&P 500 (20-year average is 28%).
Technical update. Equities are quiet this morning, following modest gains for US stocks Wednesday. More significant technical action is occurring outside of equities, as the US dollar makes another 52-week low and the 10-year Treasury yield is within 3 basis points of its highest level since March.
COVID-19 news. New cases in the United States rose 6.6% week over week on Wednesday, slightly above Tuesday’s 6.0% increase, while keeping the seven-day average below the prior week—by 6.5% (source: COVID Tracking Project).
- Hospitalizations rose 8.2% week over week Wednesday and eclipsed 100,000 for the first time.
- The US Centers for Disease Control shortened its recommended quarantine period from 14 days to 7 or 10 days, depending on symptoms and test results.
- Los Angeles issued a new stay-at-home order.
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