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Wall Street starts higher amid hopes for stimulus and vaccine rollout

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Wall Street’s main indices started the week on a positive note as optimism over a stimulus package and the start of a coronavirus (COVID-19) rollout across the US boosted equities.

Shortly after the opening bell, the Dow Jones Industrial Average rose 0.67% to 30,247, while the S&P 500 climbed 0.58% to 3,684 and the Nasdaq was up 0.68% at 12,462.

While the main indices were on the up, shares in tech giant and Google parent Alphabet Inc (NASDAQ:GOOG) were flat at around US$1,776 as the conglomerate suffered a service outage on its YouTube, Docs and Gmail platforms, although the core search engine is unaffected.

Also having a rough morning was cinema chain AMC Entertainment Holdings Inc (NYSE:AMC), which sank 11.7% to US$3.46 following Friday’s news that a US$100mln cash injection would only be enough for its to stave off bankruptcy until January.

7.40am: Wall Street to start on the front foot

US indices are expected to regain their mojo as US lawmakers prepare to present a US$908bn stimulus package proposal later today.

The Dow Jones industrial average, which of the big three indices was the only one to advance on Friday, is set to add 223 points to Friday’s gains at 30,269 when trading starts this afternoon.

The broader-based S&P 500 is tipped to jump 26 points to 3,689 and the Nasdaq Composite is seen rising 67 points to 12,445.

Craig Erlam, the senior market analyst, said there appears little prospect of the usual gentle easing off at the end of the year in 2020.

“Negotiations [are] going right down to the wire both in Washington and Brussels, while the Fed is widely expected to provide fresh stimulus to see the economy through this brutal winter wave of Covid-19. Just as we enter the holiday season when families are going to celebrate together, the US is seeing record numbers of Covid cases and fatalities, and the trend doesn’t appear to be slowing,” he noted.

The US reported 191,000 new coronavirus (COVID-19) cases yesterday, up 8.7% week-on-week.

The seven-day daily average increased to 214,000, which is a new high but the rate of increase does at least seem to be easing off.

“If this continues, it could peak by the end of this week, as a result of the rolling patchwork of measures implemented across the country but a final spike is likely to be triggered by the holiday season,” warned Ian Shepherdson at Pantheon Macroeconomics.

“The trend in cases had peaked just before Thanksgiving, at about 176K cases per day. Assuming that trend would have continued, the holiday has triggered almost 320K excess cases, so far, which can be expected to result in just over 2K extra fatalities, other things equal

“The test positivity rate now seems to have peaked, but it is not yet trending down, and the current 14% trend is high enough to signal that many cases are not being detected,” Shepherdson suggested.

Against that backdrop, reports suggest that supplies of one of the vaccines developed to combat the coronavirus are now arriving in US distribution centres.

Four things to watch for on Monday:

  • Stimulus negotiations will likely hold most of the market’s attention today as US politicians prepare to present a US$908 billion proposal later today
  • Meanwhile, share price reaction may be eyed from Pfizer Inc (NYSE:PFE) as its COVID-19 vaccine, developed with German firm BioNTech, began to be distributed in the US following approval from the FDA at the end of last week
  •  Also in focus could be video game giant Electronic Arts Inc (NASDAQ:EA) after it struck a deal to acquire London listed racing games developer Codemasters Group Holdings PLC (LON:CDM) for £945 million (US$1.25 billion)
  • The macro calendar is looking sparse, however some may find interest in US consumer inflation expectations data for November, which is expected to fall to 2.8% from 2.84%

Story by ProactiveInvestors


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