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US benchmarks poised to continue higher Thurday on fresh US stimulus package hopes

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Hopes are rising for a breakthrough in the negotiations over a new US stimulus package, and that’s feeding through to US equities.

Based on current spread betting quotes, the S&P 500 index should open 29 points higher at 3,392 and the Dow 231 points heavier at 28,013. The tech-heavy NASDAQ Composite is expected to kick on by around 400 points to 11,567.

“US Treasury Secretary Mnuchin said post-Wednesday’s US close that an agreement had been reached on the contentious issue of direct payment to Americans, clearing a significant hurdle in moving forward,” reported Stephen Innes at Axi.

“He also said that President Trump had instructed them to come up significantly, although a gap remains in terms of the size of any stimulus package with the Democrats at about US$2.2 trillion while the GOP is at around US$1.5 bn.

“The escalator clause could be the special sauce and maybe how the Republicans try to meet the Democrats where they are, and House Speaker Nancy Pelosi can still feel like she can claim victory in getting the number closer to her US$2.2 trillion target,” Innes added.

“The stimulus deal is very much needed and will come as a massive relief to many unemployed Americans who were having a vision of that proverbial lump of coal in their holiday stocking this year. Mind you, more than a few traders were too,” he quipped.

Pundits have had over a day now to take soundings on who came out better in Tuesday night’s ill-tempered presidential debate and the consensus seems to be that if Trump needed to land a knock-out blow to close the gap in the opinion polls, he failed to land one on Tuesday night .

That’s a figurative “knockout blow”, not a literal one; no one knows what happened after the cameras stopped rolling but the prospect of two septuagenarians getting involved in a physical tear-up doesn’t bear thinking about.

“So far the stock market doesn’t seem too upset at the prospect of Biden winning, despite Trump’s more market friendly policies. Perhaps folks think their stocks and 401(k)s will do better with higher taxes and increased regulation than with nastiness and scorched earth,” suggested Lloyd Blankfein, once the head honcho at investment bank Goldman Sachs.

According to Marshall Gittler at BDSwiss, the market took the view that the debate increased the likelihood of the Democrats taking the Senate, too, “although the odds there are close,” Gittler observed.

There will be plenty of other US economic releases today to take traders’ minds off politics, including the personal income and spending figures for August.

“These are expected to show that income declined as the impact of job growth was more than offset by the waning of fiscal transfers. Even so, retail and auto sales data point to a further lift in consumer spending during the month. The reverse of spring discounts should see the core PCE deflator post a further 0.3%M/M [month-on-month]lift, nudging annual inflation up 0.1ppt [percentage points] to 1.4%Y/Y [year-on-year],” said Daiwa Capital Markets.

Also due out today are automobile sales data for September and the manufacturing Institute for Supply Management (ISM) survey, also for September.

“Regarding the latter, while the manufacturing sector remains in recovery mode, the recent pace of activity appears to have waned and we might well see the headline ISM fall back from the elevated level seen in August (56.0) which was the highest since late 2018,” Daiwa predicted.

Five things to watch for on Thursday:

  • In company news, foodstuffs giant Conagra Brands (NYSE:CAG) is in focus and projected to report before the New York bell quarterly earnings of $0.57 per share on revenue of $2.61 billion.
  • On the macro front, data on initial jobless claims for the latest week will be released at 8:30 am. Analysts expect new unemployment claims to fall to 850,000 last week compared to 870,000 in the previous week, indicating some  improvement in the market.
  • Any new developments on the US stimulus package will of course also be closely monitored.
  • The ISM manufacturing composite index for last month (September) is scheduled for release at 10am with analysts expecting the index to rise to 56.3 for the month versus a previous reading of 56.0. In addition, data on construction spending for August will be released at the same time. Spending is estimated to increase 0.7% in August.
  • The Federal Reserve is also in focus on Thursday with New York president John Williams and Fed governor Nichelle Bowman due to speak at 11am and 3pm EST respectively.

Story by ProactiveInvestors


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