Thursday, December 17, 2020
Jobless Claims Miss Again
Weekly initial jobless claims rose 23,000 to 885,000 according to the US Department of Labor, above Bloomberg consensus expectations of 818,000. Filings from the prior week were also revised higher from 853,000 to 862,000. Continuing claims beat expectations, declining to 5.5 million and ahead of Bloomberg forecasts of 5.7 million.
Stocks rise with stimulus hopes. US markets opened higher on increased expectations of a $900 billion stimulus deal while Congress hashes out the final details.
- Stimulus deal includes $300 per week in supplemental unemployment insurance and $17 billion for airlines, but omits aid to state and local governments.
- European stocks are higher in midday trading, once again led by the German DAX.
- Asian markets also were positive, with the Shanghai Composite leading; Korea was the laggard.
Fed’s guidance reassures market. The Federal Reserve (Fed) concluded its final policy meeting of the year on Wednesday, and its updated bond purchase guidance was enough to reassure markets.
- The Fed sharpened its guidance on how long its bond purchase program, also known as quantitative easing, would continue. Bond purchases strengthen the Fed’s influence on longer-term rates.
- The Fed is keeping its policy rate unchanged at a target range of 0–0.25%.
- Market participants were initially disappointed that the Fed didn’t do more, but Fed Chair Jerome Powell made a strong case in his press conference that the change was substantive.
- Read more on the Fed’s meeting in today’s LPL Research Blog.
Eurozone economy losing momentum
The consensus forecast for Q4 2020 European gross domestic product (GDP) growth has fallen from +2% to -2% in the past five weeks, due largely to the impact of COVID-19 restrictions.
- Japan’s GDP (now +3.9%) has fallen by 0.7%.
- China’s GDP (+2%) has held steady.
- US GDP (+4.5%) has risen by 0.5% (source: Bloomberg).
- These trends match our current and 2021 regional preferences (US and emerging markets), as discussed in Outlook 2021: Powering Forward.
Technical update. The S&P 500 Index fell just one point short of a new record high Wednesday, closing at 3107. Sectors performance showed wide variation, with consumer discretionary gaining more than 1% and utilities falling 1.2%.
- Dollar weakness is continuing this morning, as the DXY Index hits fresh multiyear lows.
- Crude prices are trading to the highest level since early March.
- Gold is back above its 50-day moving average for the first time in six weeks.
COVID-19 news. French President Emmanuel Macron tested positive for COVID-19 Thursday after showing minor symptoms.
- Fatalities in the United States reached a new daily record of 3448 as new daily cases spiked back over 200,000 amid reporting backlogs (source: COVID Tracking Project).
- While new cases are up, the 7-day average positivity rate may be in the early stages of subsiding, down to 11.2% from its recent peak of 11.8%
LPL Research in the Media
LPL Research Chief Market Strategist Ryan Detrick joined NASDAQ Trade Talk recently.
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