Stock Market Today
US futures are up while European futures are down after the Biden administration offered a suspension of the debt limit, which had been causing volatility in equity markets over the past few weeks. Furthermore, sentiment was generally upbeat as Russia offered to assist in supplementing the highly sought-after gas for European regions. This helpline comes at a time when regions are expecting and experiencing power outages, which are highly likely to suppress manufacturing activity and add to already rising consumer prices. Stock traders will be looking at today’s jobless claims data to gain a better understanding of the labour market’s health, ahead of the Bureau of Labor Statistics’ big payrolls report tomorrow.
In yesterday’s session, the Dow Jones Industrial Average jumped 0.30%, and the S&P 500 index rose 0.41%. The Nasdaq, the tech-savvy index, surged 0.47%, and the Russell 2000, the small-cap index, dropped 0.60%.
Over the last thirty days, investors have been on a roller coaster ride as a result of domestic and foreign concerns causing heavy headwinds in equity markets. From rising inflationary pressures to massive energy shortages, stock traders have been hearing bad news after more bad news, resulting in high volatility in sentiment. However, the situation is not as bad as many people believe. Updates on the US economy show that its economy is steadily recovering, with economic activity returning to pre-pandemic levels. Furthermore, investors should view this situation as a blessing because only in a highly volatile market can investors make superior profits by taking advantage of dips and gaps that occur from time to time.
Stock markets also reacted positively to yesterday’s ADP employment data, which showed that the U.S. labor market has grown better than expected. As per the report, private companies hired as much as 568,000 in September, while the projected number of jobs added is 425,000. A strong payroll report, to be released tomorrow, could soothe concerns related to the coronavirus adversely affecting the economy and hiring issues faced by companies. Moreover, it will only strengthen the Federal Reserve’s belief that it can start winding down its huge stimulus. On the other hand, investors should keep in mind that persistent rises in consumer prices can likely fuel uncertainty in coming months.
One of the major reasons for yesterday’s stock market gains was Senate Minority Leader Mitch McConnell’s offer to the government of a short-term suspension of the debt ceiling. The offer was made in order to avoid a catastrophic default if Democrats and Republicans are unable to reach an agreement. Treasury Secretary Janet Yellen has repeatedly warned of the ramifications of the government failing to meet its obligations on time. She even went on to say that if the government defaults, the U.S. economy is highly likely to go into recession. Similarly, President Biden cautioned that a default could wipe out jobs and have a toll on savings. Hence, this is why the offer is crucial because it will give time to both parties to reach a settlement and investors will not have to worry about the government defaulting by October 18th.
Investors are concerned about Europe’s energy crisis, which has the potential to push down bond and stock markets as well as devastate major manufacturers, adding to the already-existing concerns about high inflation. Authorities in the region are finding it difficult to fill the gap between supply and demand for gas and can now only wish the winter months to be generous. One of the main drivers of rising fuel prices is lower supplies from Russia, which is the region’s largest gas producer.
However, on Wednesday, Russian President Vladimir Putin offered to help Europe ease energy prices by offering more supply and indicated this would be possible through the disputed Nord Stream 2 natural gas pipeline. The news came at a time when gas prices jumped a shocking 40% over a very short time span. If the proposed pipeline, which has already been built under the Baltic Sea between Germany and Russia, becomes operational, Russia could potentially export peak volumes of the highly demanded fuel to the European region. However, investors should keep in mind that Russia has not explicitly linked elevated supplies to the Nordic pipeline permit and has stated that other alternatives will be more environmentally damaging and costly.
Investors should understand that the United States and China getting along and working together is good for equity markets around the globe. This is because, if the two largest economies do not see eye to eye on matters, it could spark worries among investors regarding the outlook of markets around the world. Hence, President Joe Biden and Chinese President Xi Jinping meeting virtually in 2021 is good. The meeting was discussed during talks between the two nations in Zurich, but specific details are yet to be mapped out. Earlier, the Chinese military conducted flybys near Taiwan territory and Antony Blinken, U.S. Secretary of State, rebuked Beijing for risking miscalculation that could ignite confrontation.
Crypto supporters should be jumping with joy after Bitcoin, the benchmark of cryptocurrencies, surpassed $55,000 yesterday, gaining momentum to the rally started earlier this week. Bitcoin is already trading 13% higher this week. On Wednesday, crypto prices likely rose after institutional investors decided to get into the action. The mentality of institutional investors is such that they move along with the herd, fearing that their competitors might perform better, and they may miss out on the opportunity.
Earlier this week, oil prices surged on fears that supply increments by OPEC might not be sufficient to meet global demand fuelled by economic recovery. However, yesterday’s data showed that crude oil inventories in the U.S. rose unexpectedly. As per the report, crude oil stockpiles hopped 2.3 million barrels last week, versus the forecasted 418,000 barrel drop in inventories. Supply-side pressures have also abated following an increase in production in the United States by 11.3 million barrels per day after producers recuperated from a curb in production caused by hurricanes in the Gulf of Mexico. As a result, oil prices declined modestly.
Gold prices are flat as the dollar remains stable prior to tomorrow’s payroll report. A strong report by ADP signalled that the labour market performed relatively well last month, and hence the Fed is likely to move ahead and start its tapering process next month. In addition to this, consumer prices have been rising, indicating that the hawks could hastily act and push interest rates up sooner than expected. When interest rates rise, the opportunity cost of holding the non-interest-bearing precious metal increases, and hence, when investors get rid of their exposures to the yellow metal, gold prices are likely to dip. Therefore tomorrow’s payroll data is important for gold.
Asian and Pacific markets also declined following a rise in sentiment on Wall Street. As of 12.42 a.m. EST, the Nikkei rose 0.86% and the Hang Seng index, in Hong Kong, jumped 2.41%. The ASX 200 index hopped 0.68% and the Seoul Kospi increased 1.66%. China’s exchanges are closed today.