Upward Momentum May Lead To Continued Strength On Wall Street

The major U.S. index futures are currently pointing to a higher opening on Monday, with stocks poised to add to the strong gains posted during a turbulent 2020.

The markets may benefit from recent upward momentum, which has helped propel the major averages to new record highs due in part to the approval of a new fiscal stimulus bill.

The relief package passed by Congress and signed by President Donald Trump late last month should help prop up an economy that has already made big strides recovering from coronavirus-induced lockdowns.

Optimism about the impact of coronavirus vaccine rollouts may also help stocks extend the strong upward move seen over the course of last year.

Trading activity may be somewhat subdued, however, as some traders may be reluctant to make significant moves ahead of two key Senate runoffs in Georgia on Tuesday.

The outcome of the runoff elections will determine which party controls the Senate and could have a major impact on what President-elect Joe Biden is able to accomplish.

Traders may also look ahead to Friday’s closely watched monthly jobs report, which is expected to show a continued slowdown in the pace of job growth in the month of December.

Stocks showed a lack of direction throughout much of the trading session on Thursday before moving to the upside going into the close. With the late-day advance, the Dow and the S&P 500 reached new record closing highs.

The major averages all closed in positive territory, although the Nasdaq posted a more modest gain, inching up 18.28 points or 0.1 percent to 12,888.28. The Dow advanced 196.92 points or 0.7 percent to 30,606.48 and the S&P 500 climbed 24.03 points or 0.6 percent to 3,756.07.

The late-day strength on Wall Street may have reflected window dressing, as traders looked to give their portfolios a boost going into the end of the year.

Traders seemed reluctant to make significant moves for much of the session, with some likely looking to get a head start on New Year’s Eve celebrations.

The gains on the day capped off a strong year for U.S. stocks, which moved sharply higher for 2020 despite the ongoing coronavirus pandemic.

For the year, the Dow jumped by 7.3 percent and the S&P 500 surged up by 16.3 percent, while the tech-heavy Nasdaq skyrocketed 43.6 percent.

The substantial gain by the Nasdaq came as tech stocks benefited from the stay-at-home orders issued in response to the spread of the deadly coronavirus.

Most other sectors also recovered from the sell-off seen as lockdowns were imposed, with optimism about a swift economic rebound driving the markets higher even as the death toll spikes.

On the economic front, the Labor Department released a report unexpectedly showing a modest drop in first-time claims for U.S. unemployment benefits in the week ended December 26th.

The Labor Department said initial jobless claims edged down to 787,000, a decrease of 19,000 from the previous week’s revised level of 806,000.

The dip surprised economists, who had expected jobless claims to rise to 833,000 from the 803,000 originally reported for the previous month.

“We think that holiday noise and uncertainty about extensions of benefits may have held down claims last week,” said Nancy Vanden Houten, Lead U.S. Economist at Oxford Economics.

She added, “The risk is for a rise in claims in the weeks ahead now that emergency programs have been extended and an additional $300 in weekly benefits is being provided.”

Computer hardware stocks showed a significant move to the upside on the day, driving the NYSE Arca Computer Hardware Index up by 1.7 percent.

Considerable strength also emerged among utilities stocks, as reflected by the 1.7 percent gain posted by the Dow Jones Utilities Average.

Banking, commercial real estate and healthcare stocks also moved notably higher over the course of the trading session.

Meanwhile, gold stocks showed a substantial move to the downside, dragging the NYSE Arca Gold Bugs Index down by 2.1 percent.

The weakness among gold stocks came despite a modest increase by the price of the precious metal.

Commodity, Currency Markets

Crude oil futures are rising $0.30 to $48.82 a barrel after ticking up $0.12 to $48.52 a barrel last Thursday. Meanwhile, after inching up $1.70 to $1,895.10 an ounce in the previous session, gold futures are soaring $49.40 to $1,944.50 an ounce.

On the currency front, the U.S. dollar is trading at 102.97 yen versus the 103.20 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is trading at $1.2292 compared to last Thursday’s $1.2215.

Asia

Asian stocks rose broadly on Monday after regional business surveys showed Asian factory activity expanded moderately in December, thanks to robust demand in regional giant China.

Chinese shares rose as the latest survey from Caixin revealed the manufacturing sector in China continued to expand in December, albeit at a slower pace. The benchmark Shanghai Composite Index climbed 29.89 points, or 0.9 percent, to 3,502.96.

The manufacturing PMI stood at 53.0 – missing expectations for a score of 54.8 and down from 54.9 in November. An official gauge of factory activity, focusing more on larger and state-owned firms, also moderated but remained strong.

Hong Kong’s Hang Seng Index ended up 241.68 points, or 0.9 percent, at 27,472.81. Shares of China’s state-owned telecommunications companies declined after the New York Stock Exchange said it would delist three major Chinese telecoms.

Japanese markets bucked the regional trend to end notably lower after Prime Minister Yoshihide Suga said he was considering declaring a state of emergency in the greater Tokyo area to curb the spread of the coronavirus.

A stronger yen also fueled selling pressure. The Nikkei 225 Index dropped 185.79 points, or 0.7 percent, to 27,258.38, while the broader Topix fell 10.09 points, or 0.6 percent, to 1,794.59.

Japan Airlines tumbled 3.5 percent and ANA Holdings lost 2 percent on concerns over the impact of the expected state of emergency. Nissan Motor gave up 1.3 percent after a report that it plans to outsource sales of its cars in Europe to alliance partner Renault.

In economic releases, a survey showed Japan’s factory activity stabilized for the first time in two years in December.

Australian markets ended sharply higher after the country’s most populous state New South Wales reported zero new locally acquired Covid-19 cases for the first time in nearly three weeks.

The benchmark S&P/ASX 200 Index jumped 97.10 points, or 1.5 percent, to 6,684.20, making its best day since Nov. 24. The broader All Ordinaries Index surged up 103.10 points, or 1.5 percent, to 6,953.70.

Strong iron ore prices helped lift miners, with heavyweights BHP and Rio Tinto rising 1.5 percent and 1.3 percent, respectively. Smaller rival Fortescue Metals Group spiked 5.9 percent.

Gold miners Evolution Mining, Newcrest and Northern Star Resources soared 5-6 percent as the precious metal pushed above $1,900 an ounce to hit the highest level in almost two months, aided by a weaker dollar amid prospects of tougher coronavirus control measures in Japan and the U.K.

Business support services provider Link Administration Holdings slumped 13.5 percent after U.S.-based SS&C Technology Holdings shelved it’s A$3.02 billion ($2.32 billion) buyout offer.

The manufacturing sector in Australia continued to expand in December, albeit at a slightly slower pace, the latest survey from Markit Economics revealed with a manufacturing PMI score of 55.7, down marginally from 55.8 in November.

Seoul stocks began the New Year on an upbeat note as the country expanded a ban on private gatherings and said it is reviewing AstraZeneca’s request for approval of its coronavirus vaccine. Encouraging manufacturing and export data also boosted hopes of a swifter recovery from the pandemic.

The benchmark Kospi ended up 70.98 points, or 2.5 percent, at 2,944.45, logging the sharpest daily gain since mid-June and extending gains to a sixth straight session.

Chip giant Samsung Electronics rose 2.5 percent and SK Hynix surged 6.3 percent, while Hyundai Motor Co, the nation’s biggest carmaker, soared 8.1 percent on hopes for an electric vehicle boost.

The manufacturing sector in South Korea continued to expand in December at a steady pace, the latest survey from market Economics revealed with a manufacturing PMI score of 52.9 – unchanged from the November reading.

Manufacturers indicated a quicker expansion in purchasing activity, with the respective seasonally adjusted index reaching its highest point since April 2010 as a result of increasing orders.

Exports expanded at their fastest pace in 26 months in December on robust chip demand and improved global demand, raising hopes for a recovery.

Europe

European stocks have moved sharply higher on Monday as the new EU/U.K. trade deal regulations came into effect over the weekend and the U.K. began the Oxford-AstraZeneca coronavirus vaccine rollout, making another step in the global battle against the pandemic.

Sentiment was also boosted after a survey showed activity in the eurozone manufacturing sector hit its highest level since May 2018. IHS Markit’s final euro zone manufacturing purchasing managers’ index rose to 55.2 in December from 53.8 in November.

In the U.K., a survey showed growth in British manufacturing activity rose to its highest level in three years last month. The final manufacturing PMI reading for December came in at 57.5 – the highest since November 2017 and slightly above an initial flash estimate of 57.3.

While the U.K.’s FTSE 100 Index has surged up by 2.7 percent, the French CAC 40 Index is up by 1.6 percent and the German DAX Index is up by 1.1 percent.

Anglo-German travel operator TUI AG has shown a substantial move to the upside, while Air France KLM and IAG are also posting notable gains.

Ahold Delhaize NV has also moved sharply higher on the day after commencing a 1 billion euro share buyback program.

Ladbrokes owner Entain Plc has also jumped after receiving an increased offer from U.S. casino operator MGM Resorts. Miners and energy firms are also gaining ground as commodities rise on a weaker dollar.

U.S. Economic Reports

The Commerce Department is scheduled to release its report on construction spending in the month of November at 10 am ET. Construction spending is expected to increase by 1.0 percent.

Also at 10 am ET, Atlanta Federal Reserve President Raphael Bostic is due to participate in an “Innovations in Measuring the Economic Impacts of COVID 19” discussion before a virtual American Economic Association Annual Meeting.

Cleveland Federal Reserve President Loretta Mester is scheduled to participate in an “Increasing Diversity in Economics: From Students to Professors” discussion before the virtual AASS Annual Meeting at 12:15 pm ET.

A 6 pm ET, Mester is due to participate in a discussion hosted by the Korea-America Economic Association during the virtual ASSA Annual Meeting.

Stocks In Focus

Shares of FLIR Systems (FLIR) are soaring in pre-market trading after the maker of thermal imaging cameras, components and sensors agreed to be acquired by Teledyne (TDY) in a cash and stock transaction valued at approximately $8.0 billion.

Managed care company Magellan Health (MGLN) is also seeing significant pre-market strength after agreeing to be acquired by Centene (CNC) for $95 per share in cash for a total enterprise value of $2.2 billion.

On the other hand, shares of Herbalife (HLF) may come under pressure on news activist investor Carl Icahn has sold more than half his stake in the nutritional supplements maker back to the company for $600 million.