Optimism About More Stimulus May Lead To Continued Strength On Wall Street

The major U.S. index futures are currently pointing to a higher open on Friday, with stocks likely to add to the strong gains posted in the previous session.

The markets may continue to benefit from optimism that a Democrat-controlled government will lead to more fiscal stimulus and a better handling of the coronavirus vaccine rollout.

In a statement on Thursday, President Donald Trump finally acknowledged “a new administration will be inaugurated on January 20th,” although he declined to mention President-elect Joe Biden by name.

Trump has repeatedly refused to accept the outcome of the election, spouting fraudulent claims of widespread voter fraud that inspired his supporters to assault the U.S. Capitol building on Wednesday.

Traders seem hopeful for a return to normalcy, as Democrats will control both houses of congress and the White House but do not have the margin in the Senate to force through radical legislation.

The futures gave back some ground following the release of a closely watched Labor Department report showing an unexpected decrease in U.S. employment in the month of December.

Following the mixed performance seen on Wednesday, stocks moved sharply higher during trading on Thursday. With the upward move on the day, the major averages all reached new record closing highs.

The major averages all closed firmly in positive territory, although the tech-heavy Nasdaq outperformed its counterparts. The Nasdaq spiked 326.69 points or 2.6 percent to 13,067.48, while the Dow climbed 211.73 points or 0.7 percent to 31,041.13 and the S&P 500 jumped 55.65 points or 1.5 percent to 3,803.79.

The strength on Wall Street came as U.S. lawmakers certified President-elect Joe Biden’s victory after the process was delayed by several hours as supporters of President Donald Trump stormed the U.S. Capitol building.

After the Capitol building was finally secured, several Republican lawmakers abandoned plans to object to the certification of results from a number of states, although GOP opposition still led to a drawn out process.

Trump said in a statement following the vote that there would be an “orderly transition” of power to Biden but continued his fraudulent claims of widespread voter fraud that helped spark the riot at the Capitol.

The certification of Biden’s victory along with Democratic victories in Georgia’s Senate runoff elections will give Democrats control of the House, Senate and the White House.

Traders seem optimistic a Democratic-controlled government will lead to additional stimulus, but with the narrow margin in the Senate preventing major tax hikes or other policies that negatively affect big business.

Buying interest was also generated in reaction to a report from the Labor Department unexpectedly showing a modest decrease in first-time claims for U.S. unemployment benefits in the week ended January 2nd.

The report said initial jobless claims edged down to 787,000, a decrease of 3,000 from the previous week’s upwardly revised level of 790,000.

Economists had expected jobless claims to rise to 800,000 from the 787,000 originally reported for the previous week.

The Institute for Supply Management also released a report showing service sector activity in the U.S. unexpectedly grew at a faster pace in the month of December.

The ISM said its services PMI rose to 57.2 in December from 55.9 in November, with a reading above 50 indicating growth in the service sector. Economists had expected the index to edge down to 54.6.

“The composite index indicated growth for the seventh consecutive month after a two-month contraction in April and May,” said Anthony Nieves, Chair of the ISM Services Business Survey Committee.

Nieves said respondents’ comments about business conditions and the economy were mixed but noted most are “cautiously optimistic about business conditions with the recent approval and impending distribution of vaccines.”

Semiconductor stocks showed a substantial move to the upside on the day, driving the Philadelphia Semiconductor Index up by 3.9 percent to a record closing high.

Nvidia (NVDA) helped lead the sector higher after Citi added the graphics chipmaker’s stock to its Catalyst Watch list.

Significant strength was also visible among banking stocks, as reflected by the 2.4 percent jump by the KBW Bank Index. The index reached its best closing level in well over ten months.

Biotechnology, software, and computer hardware stocks also saw considerable strength, contributing to the spike by the tech-heavy Nasdaq.

Housing, steel, and energy stocks have also showed strong moves to the upside, while utilities stocks bucked the uptrend.

Commodity, Currency Markets

Crude oil futures are advancing $0.72 to $51.55 a barrel after rising $0.20 to $50.83 a barrel on Thursday. Meanwhile, after climbing $5 to $1,913.60 an ounce in the previous session, gold futures are plunging $32.20 to $1,881.40 an ounce.

On the currency front, the U.S. dollar is trading at 103.63 yen versus the 103.81 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.2268 compared to yesterday’s $1.2272.

Asia

Asian stocks rallied on Friday amid expectations that additional U.S. fiscal stimulus under the Biden administration and a mass rollout of coronavirus vaccines will spur a strong economic recovery later in the year.

China’s Shanghai Composite Index bucked the uptrend and slipped 6.10 points, or 0.2 percent, to 3,570.11 amid reports the Trump administration is considering banning U.S. entities from investing in an expanded list of Chinese companies. Hong Kong’s Hang Seng Index jumped 1.2 percent to settle at 27,878.22.

Japanese shares hit a three-decade high as the yen weakened and data showed household spending rose an annual 1.1 percent in November, marking the second consecutive monthly rise.

The Nikkei 225 Index spiked 648.90 points, or 2.4 percent, to 28,139.03 as the country began its first day under a coronavirus state of emergency.

The broader Topix closed 1.6 percent higher at 1,854.94 ahead of a long holiday weekend. Tokyo financial markets will be closed on Monday for a national holiday.

Tire maker Bridgestone surged 6 percent after French-Swiss construction giant LafargeHolcim said it would buy Firestone Building Products, a unit of Bridgestone Americas, for $3.4 billion.

Australian markets finished notably higher as stimulus hopes offset Covid-19 worries, with the country’s third largest city entering a three-day lockdown to stop the spread of a highly contagious variant of the coronavirus first identified in Britain.

The benchmark S&P/ASX 200 Index rose 45.90 points, or 0.7 percent, to 6,757.90, while the broader All Ordinaries Index ended up 43.70 points, or 0.6 percent, at 7,024.20.

Tech stocks rose broadly, with Afterpay surging 6.6 percent. Oil Search, Origin Energy and Woodside Petroleum gained 1-2 percent, buoyed by rising oil prices after major producer Saudi Arabia pledged to cut production.

Seoul stocks soared on optimism over a global recovery as U.S. Congress formally certified Biden’s election victory, paving the way for a bigger stimulus package.

The benchmark Kospi soared 120.50 points, or 4 percent, to 3,152.18, marking the largest single-day rise since June 16, 2020.

Market heavyweights led the advance, with Samsung Electronics jumping 7.1 percent and Hyundai Motor soaring 19.4 percent.

There were reports that Hyundai Motor was is in talks with Apple Inc. for a potential partnership in developing electric cars and batteries.

Europe

European stocks are mostly higher on Friday as the prospects of more fiscal stimulus under the Biden administration and the rollout of coronavirus vaccines raised hopes for an economic recovery.

Investors cheered upbeat economic data from Germany showing both industrial output and exports rose more than expected in November. Elsewhere, data showed Britain’s job market strengthened for the first time in three months in December.

The French CAC 40 Index is up by 0.5 percent and the German DAX Index is up by 0.7 percent, although the U.K.’s FTSE 100 Index has bucked the uptrend and dipped by 0.2 percent.

British homebuilder Barratt Developments has jumped. The company expects to resume dividends next month after first-half sales rate rose 12 percent to 0.77 net private reservations per active outlet a week.

Foams and composites company Essentra has also soared after the company said it was expecting to deliver 2020 operating profit in line with the consensus forecasts.

French food services and facilities management company Sodexo has also surged after its revenue trend improved in the latest quarter, despite the start of the second wave or Covid-19 in November.

Franco-Italian chipmaker STMicroelectronics has also moved sharply higher. The company said its preliminary fourth quarter net revenues are above the business outlook range provided on October 22, 2020.

Infineon Technologies and ASM International have also advanced after global peers Micron Technology and Samsung Electronics reported strong quarterly earnings.

On the other hand, Retailer Marks & Spencer has declined as it reported another big fall in sales of clothing and homewares in the three months leading up to Christmas.

Swiss bank Credit Suisse has also tumbled after saying it expects to increase provisions for the MBIA case and other RMBS-related cases by a total of $850 million.

U.S. Economic Reports

After reporting slowing job growth over the past few months, the Labor Department released a report on Friday unexpectedly showing a decrease in U.S. employment in the month of December.

The Labor Department said non-farm payroll employment fell by 140,000 jobs in December after climbing by an upwardly revised 336,000 jobs in November.

The decline surprised economists, who had expected employment to increase by about 71,000 jobs compared to the addition of 245,000 jobs originally reported for the previous month.

Meanwhile, the report said the unemployment rate came in at 6.7 percent in December, unchanged from November. Economists had expected the unemployment rate to inch up to 6.8 percent.

At 10 am ET, the Commerce Department is scheduled to release its report on wholesale inventories in the month of November. Wholesale inventories are expected to edge down by 0.1 percent.

Federal Reserve Vice Chair Richard Clarida is due to speak remotely in a virtual meeting hosted by the Council on Foreign Relations at 11 am ET.

At 3 pm ET, the Federal Reserve is scheduled to release its report on consumer credit in the month of November. Consumer credit is expected to increase by $9.0 billion.

Stocks In Focus

Shares of Micron Technology (MU) are likely to see initial strength after the chipmaker reported better than expected fiscal first quarter results and provided upbeat guidance.

Electric scooter maker Niu Technologies (NIU) may also move to the upside after reporting a sharp increase in fourth quarter sales.

Shares of Goodyear Tire (GT) are also likely to advance after KeyBanc upgraded its rating on the tire maker to Outperform from Sector Perform.

On the other hand, shares of Sarepta Therapeutics (SRPT) after plummeting in pre-market trading after the company reported disappointing results from a study of its gene therapy treatment for Duchenne muscular dystrophy.