Hi Everyone,
The stock market extended its winning streak to three days, and today’s session was clearly the most bullish of the week, with the key cyclical sectors leading the charge. The Dow was up 527 or 2.1%, to 26,270, the Nasdaq gained 75, or 0.8%, to 9,683, while the S&P 500 rose by 42, or 1.4%, to 3,123. Advancing issues outnumbered decliners by a more than 5-to-1 ratio on the NYSE, where volume much was heavier than it has been of late.
Traders said that bulls once again proved that they are firmly in control on Wall Street, and the excellent job market data could fuel the next leg higher in stocks. As one trader explained, “The bullish rotation into the hardest-hit industries continued in earnest today thanks to the ADP report, and the fact that the key overseas markets joined the party this week, means that bulls still have a lot going for them.”
Today’s rally marked another crucial technical milestone, with the Dow, the weakest of the large-cap benchmarks since the start of the pandemic touching its 200-day moving average. While the Nasdaq has been showing relative weakness this week, as the traditional cyclical sectors outperformed tech stocks, the index is now only one good day, less than 1.5%, below its record high. The Nasdaq would be the first major global benchmark to erase the COVID bear market, but given the broad strength in Europe this week, several of the indices might soon follow suit.
The U.S. political uncertainty and the China tensions continue to be the main short-term risk factors, but thankfully, yesterday’s protests were much more peaceful than in recent days. The Trump Administration banned Chinese passenger carriers from entering the U.S., further increasing the diplomatic pressure on China. That said, the two sides continue to stick to the “phase one” trade deal, and analysts think that as long as the two sides do not start imposing direct trade measures, the risk to the still-fragile global economy remains low.
The ADP payroll number provided one of the biggest positive economic surprises in recent memory, with only the recent blowout new home sales release coming close. The weekly new jobless claims numbers added up to over 40 million claims since the onset of the pandemic, but the continuing claims hinted that the job market has already been healing since the end of May. The relatively short lockdown period in the U.S. likely contributed to the better-than-expected number, and even though a lot of lost jobs might not come back quickly, the worst-case job market scenarios have likely been proven wrong.
As always, have a great evening and stay tuned!!!
Joe
