Stock Market Today
Futures in the United States are flat, while those in Europe are up, after bulls rallied last week, following the Federal Reserve’s apparent dovish stance on tapering, which is set to begin later this month. Furthermore, the critical payrolls report came in better than expected, indicating that the labour market is on its way to pre-pandemic levels. As a result, the Dow Jones Industrial Average gained approximately 200 points on Friday.
Today’s appearances by various Fed officials, including Fed Chair Jerome Powell and Fed Governor Richard Clarida, are likely to have an impact on stock markets. Similarly, Andrew Bailey, Governor of the Bank of England (BOE), is scheduled to speak today as well.
In Friday’s session, the Dow Jones Industrial Average surged 0.56%, while the S&P 500 index jumped 0.37%. The Nasdaq, the tech-savvy index gained 0.20%, and the Russell 2000 soared 1.44%.
The stock market indices rose on Friday as payroll figures from the United States labour market outperformed projections. As per the labor department, the U.S. added 531,000 new jobs in October, while the expected surge in payrolls was 450,000. As a result, the unemployment rate dropped to 4.6%. Looking at the report, we can see that the payroll numbers for September and August have also been revised up. Watching economic updates over the last few weeks, we can infer that economic recovery seems to be gaining pace and is expected to remain on this trajectory in the last few months of 2021, and the first few months of 2022.
Sentiment was generally positive last week as Pfizer announced a Covid-19 pill. According to the company, its Covid-19 pill combined with a HIV drug reduces the risk of severe cases, of death and hospitalisation, by 89% in adults exposed to the notorious virus. Prior to this, Merck had also announced a similar drug in pill form, having the ability to treat coronavirus patients. These drugs can prove to be game changers if they are given the green light by regulators.
Similarly, the $1 trillion infrastructure bill was passed by the U.S. House of Representatives last week. The package under the stated bill will provide much needed funds to broadband, transportation, and utilities, along with other projects.
Investors should also note that the Federal Reserve announced that it would start winding down its pandemic era quantitative easing measures later in November but kept its pace of tapering slow. For now, the biggest driver for stock markets will be the inflationary readings to be released later this week. The consumer price and producer price indices are expected to come in sizzling. We also saw that mean hourly wages surged 4.9% last month on a year over year basis. Until now, the Fed has been saying that rising consumer prices are likely to be short-term. However, now officials are debating whether to remain patient is the right strategy.
Momentum seems to re-enter the crypto markets as most of the cryptos rallied over the weekend. The price action of Ethereum is particularly intriguing as it marches towards the 5K price level. The general consensus is that if the crypto rally goes full swing, we are likely to see Bitcoin price moving towards the 100K price level, and Ethereum could easily touch the 10K.
Following the debut of Bitcoin-linked ETFs, corporations have begun exploring ways to begin offering Bitcoin-related products to their clients in nations all over the world. Companies are racing to become industry leaders and capitalise on first-mover advantages. Paytm is an example of such a company. Paytm is one of India’s largest digital payment companies. It has stated that it will gladly consider offering cryptocurrency products if Indian regulators work to remove barriers and uncertainties in the digital space.
Previously, Bitcoin-related transactions were prohibited in India, but the country’s legal system lifted the ban in March 2020. The government has been considering implementing cryptocurrency regulations since then, but the Reserve Bank of India continues to view digital coins critically and favours a permanent ban.
Crude oil prices rose on Friday, after OPEC+ reiterated that, despite rising demand, it is not interested in increasing its oil supply. The cartel has decided to stick to its original plan of increasing supply by 400,000 barrels per day. Over the last few weeks, President Biden has urged oil-producing countries to expand supply in order to keep oil prices from reaching new highs. Moving forward, the only way to meet the needs of the oil market is for major economies around the world to work together. The US government is considering using its strategic petroleum reserves (SPR) to lower oil prices, but this method will most likely only temporarily smooth markets. It will not be a sustainable solution.
Gold prices rose nearly 1% on Friday after the Federal Reserve took a less hawkish approach to tapering, implying that interest rate hikes are unlikely to occur until at least the middle of 2022. Despite the fact that consumer prices continue to rise, it will be some time before labour markets reach full employment. The latest payroll data, released last week, shows that the labour market is improving.
Furthermore, the Federal Reserve of the United States continues to believe that inflation is likely to be transitory, and that the macroeconomic environment does not necessitate a rapid revision of interest rates. A similar situation can be observed in England, where consumer prices are rising but the Bank of England has decided to keep its policy rate unchanged. As a result of lower interest rates, the opportunity cost of holding the precious metal will be lower, making gold more appealing to investors.