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DJ North American Morning Briefing: S&P 500 on Track for Best Week Since Early November

· 02/05/2021 05:58


Watch For:

U.S. Trade for December; Canada Trade for December; U.S. Employment Report for January; Canada Labour Force Survey for January.

Opening Call:

Stock futures edged higher Friday, suggesting the S&P 500 is poised for its best week in three months, on investors' bets that a fresh coronavirus-relief spending package will bolster the economy.

Futures tied to the S&P 500 ticked up 0.2%, indicating that the broad market gauge may continue to rise after closing at a record high on Thursday. The benchmark is up over 4% this week, on track for its biggest one-week gain since the week ending Nov. 6.

Contracts linked to the technology-heavy Nasdaq-100 advanced 0.4%, and those tied to the Dow Jones Industrial Average edged 0.2% higher.

The market has rallied this week as President Biden pushed ahead with efforts to pass a $1.9 trillion relief package. Democrats are using a special procedure to move ahead on the stimulus bill: The Senate is poised Friday to approve a budget plan that would advance the reconciliation process necessary to get the aid plan approved with a simple majority in the Senate.

The fresh spending is viewed by many investors as crucial for shoring up the economy, with coronavirus cases still high across parts of the U.S. "That would be a huge boost to the economy." said Edward Smith, head of asset allocation research at Rathbone Investment Management. "It certainly reduces any short term risk as we wait for the vaccine rollout to get fully up to speed."

The U.S. jobs report for January, due at 8:30 a.m. ET, will show whether the economy is picking up from a winter slowdown. Employers are expected to have added 50,000 jobs last month, according to economists. Payrolls fell in December for the first time since the pandemic triggered business shutdowns last spring. The jobless rate is forecast to hold steady at 6.7%.

Investors also remain focused on the rollout of Covid-19 vaccines, which could accelerate the speed of economic recovery. Johnson & Johnson asked U.S. regulators on Thursday to authorize the emergency use of its single-shot Covid-19 vaccine, setting the stage for a potential third vaccine to become available in the U.S. within weeks. "The more vaccines get rolled out, the more people are going to start moving around," said Gregory Perdon, co-chief investment officer at private bank Arbuthnot Latham.

Volatility in markets has also declined this week, after soaring at the end of January to its highest level since late October. The spike came as individual investors on online forums injected money into a handful of stocks, leading to frenzied trading and sharp jumps in prices. The Cboe Volatility Index, a gauge of turbulence in the broader U.S. stock market, fell to less than 22 on Friday, from over 37 last week.

Those heavily traded stocks have since lost their steam, with GameStop shedding almost 84% of its value so far this week while AMC Entertainment Holdings declined 46%.

Popular trading app Robinhood Markets removed the last of its trading limits on shares of both companies, according to its website. GameStop rose over 13% in premarket trading, while AMC gained 8%.

The corporate earnings season remains under way. Regeneron Pharmaceuticals and Estée Lauder are among the companies set to report quarterly results before the market opens.


A robust U.S. non-farm payroll report for January may weaken the dollar slightly but the currency is still likely to stay stronger against the euro, Commerzbank said.

Positive labor market data could dampen expectations for large-scale U.S. fiscal stimulus to support the country's recovery, Commerzbank's Esther Reichelt said.

However, the EU's recovery fund could turn out to be a damp squib in coming months, she said.

The EU's difficulties are unlikely to end any time soon and U.S. lawmakers should approve further stimulus so the dollar should maintain the upper hand for now, she said.

The euro could fall to a range of $1.10 to $1.15 in coming months, from $1.1982 currently as the U.S. economy's recovery is expected to outpace the eurozone's, Nordea Asset Management said.

The U.S. could relax coronavirus restrictions sooner than the eurozone due to a faster vaccine rollout, which combined with the prospect of large-scale fiscal stimulus, should support the U.S. economy, Nordea analyst Sebastien Galy said.

"This should drive the U.S. Treasury curve to steepen and bring forward a tad expectations of rate hikes," he said.

A steepening yield curve is when the gap between short-term and long-term government bond yields widen and typically indicates investors expect stronger economic growth and rising inflation.


In bond markets, the yield on the 10-year Treasury note was little changed at 1.141%, from 1.140% Thursday.


Brent crude oil was up 1.1% and WTI futures were up 1.2%, with both benchmarks on course to close the week 8% and 9% higher respectively after the market was cheered by strong OPEC+ compliance, dropping U.S. inventories and signals of upbeat physical demand.

Saudi Aramco maintained its official selling prices to Asia for March according to reports, defying expectations that it would cut them, and raised them in Europe, with DNB Markets' Helge Andre Martinsen citing a tightening physical market. Martinsen added that oil is being supported by gains in broader markets.

Gold rose but is still on course for its worst week since the start of the year, as U.S. Treasury yields climb.

Comex futures are up 0.9% at $1,807.50 a troy ounce, but the metal slumped below $1,800 an ounce on Thursday for the first time since November.

Hopes for U.S. stimulus measures helped Treasury yields firm, weakening the appeal of gold as a haven asset.

"The prospect of a juicy wave of government spending and borrowing sent longer yields higher," said Jeffrey Halley, market analyst at Oanda. "The risks are skewed towards more downside pain for a structurally long gold market as the weekend approaches," he said.


Johnson & Johnson Asks U.S. Regulators for Emergency Approval of Its Covid-19 Vaccine

Johnson & Johnson asked U.S. regulators on Thursday to authorize the emergency use of its Covid-19 vaccine, setting the stage for a potential third vaccine to become available in the U.S. within weeks.

J&J's move follows last week's release of results from an international clinical trial showing that a single shot of the vaccine was 66% effective at preventing moderate and severe Covid-19 disease. In the U.S. portion of the trial, the vaccine was 72% effective at preventing disease.


Kia Seeks Partners to Build Apple Car in Georgia

Kia Corp. has approached potential partners about a plan to assemble Apple Inc.'s long-awaited electric car in Georgia, according to people familiar with the matter.

The proposal would involve a multibillion-dollar investment, according to people familiar with the matter, who stress that a deal hasn't been completed. If successful, it would thrust the iPhone maker into the car business after several years of secretive work in which its engineers plotted to upend the 100-plus-year-old automotive industry.


Alibaba Sells $5 Billion of Bonds

Alibaba Group Holding Ltd. sold $5 billion of bonds, showing investors remain eager to back the Chinese e-commerce giant despite its recent run-ins with authorities.

The company issued four sets of bonds priced to yield between 2.143% and 3.251%, Alibaba said in a filing. Alibaba sold $1.5 billion each of 10-year and 30-year debt, plus $1 billion each of bonds due in 20 and 40 years.


News Corp Posts Most Profitable Quarter Since 2013

News Corp said net quarterly profit nearly tripled, driven by strong growth at its book-publishing and digital real-estate businesses as well as at Wall Street Journal parent Dow Jones & Co.

The New York-based media company, which owns the Journal, HarperCollins Publishers and news organizations in the U.K. and Australia, posted net profit of $231 million, or 39 cents a share, in the quarter ended Dec. 31, compared with $85 million, or 14 cents a share, a year earlier, thanks to improved performance and lower operating expenses. Revenue slipped 2.6% to $2.41 billion, primarily due to the loss of contributions from its coupon-publishing unit, which was sold last year.


Punch Bowl Secures Ch. 11 Loan After Rival Investor Backs Down

Bankrupt "eatertainment" chain Punch Bowl Social Inc. won approval for up to $11.2 million in financing from CrowdOut Capital LLC after a competing lender dropped an objection that a bankruptcy judge called "salacious."

Denver-based Punch Bowl went to the U.S. Bankruptcy Court in Wilmington, Del., on Thursday seeking funding from CrowdOut after rival investor Sortis Holdings Inc. lodged an objection alleging professionals handling the bankruptcy pressured company officers and directors to accept CrowdOut's deal.


Peloton Taps Brakes to Fix Delivery Woes

Peloton Interactive Inc. said it would delay the U.S. launch of a much-anticipated new treadmill and start shipping exercise equipment by air in an effort to ease extreme delivery delays on its connected exercise gear.

The company has cut back marketing and doubled the size of its customer-service operation to address monthslong wait times and delivery cancellations that have legions of would-be customers railing against Peloton on social media. It said it expects delivery times to return to normal by the end of June.


January Jobs Report to Signal State of Economic Recovery

The U.S. jobs report for January will show whether the economy is picking up from a winter slowdown.

Economists expect employers added 50,000 jobs last month, after payrolls fell in December for the first time since the coronavirus pandemic triggered business shutdowns last spring. The jobless rate is forecast to hold steady at 6.7%.


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February 05, 2021 05:58 ET (10:58 GMT)

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