There are two important things that traders are waiting today. Firstly, the U.S. stimulus package has already had a rubber stamp from U.S. Senate – the major hurdle. The House plans to vote on this today. However, it may not be a stretched statement to say that a large part of this news is already baked into the market.
As there are no surprises expected when it comes to the U.S. stimulus package, the final green light from the House may not have too much of an impact on the stock market. But this is not to say that stocks will not react to the U.S. stimulus package. Absolutely not; the $1.9 trillion stimulus is surely going to continue to push the stock market higher in the medium term.
Traders may sell the news when it finally becomes official, but we should see a positive influence of this stimulus on the U.S. economy in the coming weeks. Basically, all those stimulus checks, which Americans are going to get, are likely to push the U.S. Retail Sales number even higher. This means that the upcoming few readings could show a strong retail sales number as Americans spend their stimulus cheques.
Secondly, comes the release of the U.S. inflation number, which is due later today. The data may reinforce the concerns and qualms that investors have about inflation. For the last two months, we have already seen Treasury yields rising at an alarming pace, and if today’s number comes in with a strong reading, a highly likely scenario, we could see the 10-year Treasury yields soaring even further. Any significant moves in the Treasury yields will also influence the U.S. stock market that posted a stellar rally yesterday.
The Nasdaq Composite Index, also known as the tech index, soared over 3% yesterday. The gains for the index came after several days of heavy sell-off, which pushed many of the work-from-home stocks lower. Tesla, a consumer discretionary stock, also posted some serious gains yesterday. The stock price rose over 20%, and it erased several days of losses.
The S&P 500 index was also able to score further gains yesterday. The Dow Jones industrial index also closed in positive territory with small gains as investors mainly favoured heavily beaten tech stocks. The volatility index, VIX, fell 5.65% yesterday.
As for commodities, gold is trading above the critical price level of $1700. Higher bond yields have certainly opposed several challenges for gold, as gold also acts as an inflation hedge. The fact that investors have started to back riskier assets, we may not see much buying taking place.
This means that the gold price may struggle to reach the $1800 price level in the short term. Gold ETFs are also not showing any convincing signs that money is flowing at a significant pace. Perhaps the shining metal has a lot of work to do in order to attract more capital.
Oil prices continue to trade choppily after their massive rally that we experienced last week. Both Brent and crude prices have pulled back significantly after the OPEC’s supply decision, leading to a massive rally in oil prices. Oil traders will be eyeing the upcoming crude oil inventory data, which is expected to come in at 3 million against the previous reading of 21 million. A large number of refineries are still shut down, and this could lead to a higher crude supply.