Stock Market Today
US stock market futures are trading higher after Wall Street gained for three days in a row. Despite a significant growth in jobless claims last week, the three major indices closed in the green yesterday, boosted by a strong performance by technology stocks.
Stock traders should understand that the growth in tech stocks came amid rising concerns related to the rise in Covid cases caused by the Delta variant. Investors are unsure what this update means for the economy’s recovery in the coming months. Investors should keep in mind that, at the height of the coronavirus pandemic, tech stocks provided a haven for distressed investors due to their higher-than-average earnings performance. Responding with the same strategy, investors are moving away from stocks positively correlated with economic cycles to tech stocks in an attempt to hedge their risk.
Furthermore, stock traders are awaiting the earnings of major technology companies such as Amazon, Microsoft, Apple, Google, and Facebook, which are set to be released next week.
The number of people filing for unemployment benefits expanded by 51,000 to 419,000 in the week ending July 17. It was expected that the figure would fall to 350,000. This is the highest weekly growth since March and the highest level since May. Many states have already reduced unemployment benefits, claiming that they discourage employees from looking for work. However, a rise in cases caused by the Delta coronavirus variant, which accounts for 83% of new cases in the US, has frightened investors who are concerned about the imposition of new restrictions.
Investors should understand that, while the labor market improved significantly in the first half of 2021, with the economy reopening and a successful curb on rising Covid cases, a sustained improvement in the US economy would be tricky, and thus they should factor bumps like this into their decision-making process.
Equities in Europe have also posted gains for the last three consecutive days and government debt in the region has surged following the pledge by the European Central Bank (ECB) that it would not taper down its stimulus through bond purchases. The ECB reassured investors that it would keep its pandemic emergency purchase programme running until at least March 2022, and possibly longer, to respond to the coronavirus situation and avoid a taper tantrum. Similarly, the ECB intends to keep interest rates at their current low levels until 2022, when it expects inflation to moderate and stabilize at 2%.
Moving forward, cryptocurrency investors should keep an eye on the Bitcoin price chart, as there has finally been a shift from bad news to good news. Following the news that Elon Musk still has exposure to cryptocurrencies, JPMorgan has become the first large bank in the United States to provide its advisors with access to five crypto funds that they can trade on behalf of a client. Similarly, Morgan Stanley announced that it was providing its clients with exposure to cryptocurrencies through two external crypto funds.
JPMorgan is also said to be working on launching an actively managed Bitcoin fund for its clients. Banks moved into the block chain space after the National Cash Register collaborated with NYDIG, a digital asset management company, to work on allowing 650 US-based banks to offer crypto trading services to nearly 24 million customers.
Gold and the US Dollar
Gold prices were boosted yesterday following the retracement seen in treasury yields subsequent to the data released by the labor department showing an unexpected rise in unemployment claims. Investors should understand that real interest rates are deeply negative, depicting the rise in inflation and that the fed is unlikely to raise real interest rates in the short term. These factors have influenced stock traders to channel resources to the bullion.
The dollar index, on the other hand, settled at 92.85, up nearly 0.02% as of 11:00 p.m. EST. Remember that the FOMC meeting is scheduled for next week. The meeting would provide investors with clues about potential policies influencing the future outlook of interest rates and hence an insight into future gold prices, as higher interest rates are followed by a rise in the value of the US dollar and vice versa.