The Dow Jones futures are trading lower while the US stock market is set to finish its best quarter since 2009. European and Asian markets are also on track for the same award, it seems like traders have rewarded the coronavirus stock market rally despite the lingering economic recovery concerns and emergence of the second coronavirus wave in various hotspots. In the stock market today, investors are optimistic about better than expected US economic data released yesterday. The fact that the US coronavirus cases increased below the last week’s daily average. We also had strong economic numbers out of China, and this further strengthens the argument that coronavirus economic recovery is taking place in China and the US—the two biggest economies of the world. China reported better than expected purchasing-manager index for services and manufacturing, and over in the US, we had a bow out pending home sales number.
As for the US-China relations, Beijing passed the new national security law for Hong Kong, and the Trump administration has suspended some trade benefits for Hong Kong. The question now is how will China react to this as it has warned the US not to interfere in its domestic affairs. Beijing considers Hong Kong an internal matter.
The S&P 500 futures, along with Dow Jones futures, are likely to focus on the Fed Chairman’s testimony to Congress later today. But it is the US confidence data that could initiate more volatility in the markets because traders are going to weigh the coronavirus recovery sentiment based on this data. The forecast is for 91.6 against the previous reading of 86.6
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S&P 500 Stocks Records Best Quarter
The S&P 500 chart below shows that the index is on track to record the best quarterly performance since 2009, while speculators continue to talk about fragile recovery and various shapes of recoveries. The facts are in the hard data, and it tells us one thing: those who believed and participated in this coronavirus stock market rally have enjoyed the best quarterly gains in over nine years.
The Dow Jones has recorded the best quarterly performance since the financial crisis as the chart below confirms.
Dow Jones and S&P 500 Futures Today
The Dow Jones futures are trading lower by 100 points, earlier today they were positive.
The Dow Jones futures confirm serious bull strength on a daily chart. The Dow’s price has moved above the 50-day moving average, and this has strengthened the bull case once again. The next biggest milestone, and a further vote of confidence, will surface when the Dow Jones takes out the 200-day moving average and closes above this average.
The S&P 500 index has firmly bounced back from its 50-week moving average on a weekly time frame, and this shows that the S&P 500 stocks are in no mood of losing their bullish momentum. The S&P 500’ price needs to stay above the 200-day moving average on a daily basis for this bullish momentum to continue.
Stock Market Rally
Investor confidence was boosted by the Federal Reserve’s chairman’s stance, which appears to concur that current measures to date are sufficient for the US economy. For him, the economy is in the recovery mode, and improvement in consumer spending has taken place “sooner than expected”. In his prepared remarks to Congress today, released ahead of the event, he also seems optimistic about hiring.
The S&P500 index gained its strength back and surged 1.47% yesterday. All the 12 sectors of the S&P 500 index closed in positive territory with industrial and communication sectors leading the way. Boeing BA was one of the strongest S&P 500 stocks and contributed most of the gains for the index. The S&P 500 index is trading at a price to earnings ratio of 21.5 on a trailing basis.
The Dow Jones index also dug itself out of a black hole and closed with a gain of 580 points. 29 out of 30 DJ30 stocks closed in positive territory.
The NASDAQ composite is also known as the tech index soared 1.14%. Facebook that was under immense selling pressure because of its advertisement revenue, and closed higher by 2.11%
Trump Economic Team Faces “Exodus”
President Trump’s economic team is facing “exodus”, Bimal Patel, a top deputy to Treasury Secretary, Steven Mnuchin, is leaving the Trump administration according to the Washington Post. Without the fiscal and monetary policy support, the economic situation due to coronavirus would have been very different to what it is today. Having said this, the arrival of the second coronavirus wave has created several challenges for Trump. He not only has to stabilize the economy but also needs to deal with the threat of the second Covid-19 wave in order to secure another term. If the top people in Trump’s team continue to leave, it will create an extra layer of uncertainty for both Trump and investors.
Trump Is Failing to Unite Americans
In terms of uniting Americans under one roof, Trump is failing in this task miserably. President Trump retweeted a video of a St. Louis couple who were aiming guns at protesters. Before, he deleted his tweet that shared a video that featured a supporter saying “White power!”. Trump is making his position very clear about protestors, and the approach adopted by him is likely to divide the nation. This will cause some serious adverse ramifications for the US economy.
Iran Issues Arrest Warrant For Trump
Geopolitical tensions are likely to anchor further after Iran has issued an arrest warrant for Donald Trump. The drone strike that killed Qasem Soleimani, top Iranian general in January, anchored further tensions between the US and Iran. Tehran’s attorney general Ali Alqasi Mehr said that Trump would be prosecuted after his term, semi-official Fars news agency reported. Interpol has made its position clear; it is not going to get involved and “would not consider requests of this nature”. US officials have labeled the Iranian act as a political stunt, but the question is if Trump is going to do something about it, given that he is still the president of the United States.