The Dow Jones futures continue to fluctuate between gains and losses for investors are not entirely sure whether the current economic recovery will last. The economic recovery in the US is very fragile because coronavirus cases are still rising.
The US reported a record single-day increase of over 60,000 Covid-19 cases on Tuesday. This has increased the risk that many states that have reopened their economies may have to reverse their action.
In addition to this, we have Trump who is missing no chance in continuously blaming China for causing the pandemic by calling the virus by “China Virus.” Tensions continue to simmer between Washington and Beijing. This has made investors reluctant to buy stocks. Hence we are not experiencing a broader recovery in the US stock market.
The stock market rally in the US is led by a handful of stocks. It is stocks like Apple, Microsoft, Tesla, and Amazon that have contributed the most towards stock market gains.
There is no other reason for the NASDAQ composite index to record all-time highs apart from the fact that stocks like Apple have blown things out of proportion for the index.
With US earnings seasons about to kick start, one of the biggest questions that traders are asking themselves, under the coronavirus influence, is if the US stocks need more fiscal stimulus? Trump wants another $2 trillion stimulus package to fight the adverse influence of coronavirus.
Congress is working on the next phase of stimulus, but again, one needs to ask this fundamental question: do we need this massive stimulus package when the US stock market is hitting record highs?
The global stock market had a positive session today. Chinese stock market shopping spree by traders led the gains for the Asian trading session. Shanghai index was the winner and recorded the gains of 1.33%. The HSI index soared 0.43%. The KOSPI and Nikkei indices jumped 0.82% and 0.68%, respectively.
US Weekly Jobless Claims
The Dow futures, along with the S&P 500 futures, are also paying attention to the upcoming US weekly initial and continuing jobless claims data. The expectations are that they have fallen to 1.38 million from 1.43 million. Continuing claims data is likely to gain more attention, and the forecast is that we may see another drop here as well. The forecast is for 18.75 million.
If we see a drop in the initial and continuing claims data today, we will likely see the US equity market strengthening. Perhaps, this could be the catalyst that pushes the S&P 500 and the Dow Jones to close the week in positive territory.
Gold Price Crossed 1,800
The precious metal, gold, finally crossed the most significant hurdle and ripped the 1,800 price level yesterday. The gold price move is backed by gold inflow in gold ETFs, as I mentioned yesterday. The current momentum in the precious metal price shows that traders are likely to support the gold price. The door is wide open for the gold price to target the all-time high.
Market Breadth: DJIA Index and S&P500 Index
The stock market’s breadth shows no significant shift in bull and bear among day traders. 37% of the Dow Jones stocks traded above their 200-day simple moving average SMA—the same number as the day earlier.
The S&P 500 index also confirmed no chance in sentiment. 40% of the index stocks traded above their 200-day SMA.
Dow Jones And S&P 500 Futures Today
The Dow futures are trading slightly lower today as traders hesitate to put bigger bets ahead of the US initial jobless claims data.
The Dow futures are still trying to move above the 200-day SMA on a daily time frame. The Dow price has tested this average again today but failed so far, which confirms weakness. However, the DJIA futures are still trading above the 50 and 100-day SMA, and as long as they continue to trade above them, the odds are stacked in favor of a bull rally.
The S&P 500 futures, which are a better representation of the overall US stock market, show traders do not have much to worry about regarding the bull run. The S&P 500 index price is trading above all the critical moving averages: 50, 100 and 200-day SMA on a daily and weekly time frame.
Stock Market Rally
The US stock market experienced a late recovery led by the tech stocks yesterday. The optimism was fueled by the comments of Atlanta’s Fed President, Raphael Bostic, who believes that things have started to level off in the US. The US economy may possibly need more stimulus.
The S&P 500 stocks closed in positive territory and recorded gains of 0.78%. Information technology stocks led the gains for the index. 8 sectors out of 12 jumped higher yesterday.
The DJIA index recovered its earlier and advanced 0.68%. 21 shares of the Dow Jones Industrial moving average closed in positive territory yesterday. Apple contributed the most gains, while Walmart was the biggest drag.
The NASDAQ, the tech-savvy index, recorded another all-time high yesterday and recorded gains of 1.36%.
Global coronavirus cases have surpassed the 12 million mark. New cases are flaring up in countries that had more reasonable control of the disease as their economies have begun to reopen. US coronavirus cases soared by 2% outpacing the 7-day average, and the death toll has started to rise as well.
Trump Again at Odds With Dr. Fauci
Trump tweeted that the death rate caused by coronavirus is down by “tenfold”. However, the US chief scientist Dr. Anthony Fauci has warned against this. “It’s a false narrative to take comfort in a lower rate of death”. Covid-19 cases are still rising in the US and Americans should not let themselves fall into “complacency”. According to Fauci, the US is still “knee-deep in the first wave”.
Dr. Fauci has also said that if you look at the graphs relating to coronavirus in Europe, the EU experienced a peak and then the curve started to flatten out. However, in the US, the curve never went down to its baseline. Now, the coronavirus cases in the US have begun to rise.
Despite this, Trump wants to open the schools in the US in the coming fall, and Trump threatened to cut the funding if schools do not reopen. In his tweet, Trump said “In Germany, Denmark, Norway, Sweden and many other countries, SCHOOLS ARE OPEN WITH NO PROBLEMS. The Dems think it would be bad for them politically if U.S. schools open before the November Election, but is important for the children & families. May cut off funding if not open!”