December 6, 2022

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Business is my step

Dow pares gains as COVID relief talks slip into weekend in Washington

5 min read

U.S. stock benchmarks were trading higher Thursday, but off the best levels of the session, as investors watched Washington lawmakers scramble to hammer out the details for a roughly $900 billion package of economic relief, with negotiations looking like they may slip into the weekend.

What are major indexes doing?
  • The Dow Jones Industrial Average
    rose 136 points, or 0.5%, to 30,290.

  • The S&P 500 index
    was up 20 points, or 0.5%, at 3,721.

  • The Nasdaq Composite Index
    advanced 82 points, or 0.7%, to 12,740.

Stocks posted a mixed finish on Wednesday after the Federal Reserve pledged to keep buying bonds until the economy was well on the way to recovery from the COVID-19 pandemic. The Dow finished slightly lower while the S&P 500 rose to end within a whisker of its all-time closing high and the Nasdaq Composite notched another record close.

What’s driving the market?

Investors largely ignored data on Thursday that revealed weakness in the economy wrought by the resurgence of the COVID-19 pandemic and focused on hope that Congressional dealmakers were at last nearing agreement on another round of fiscal aid for out-of-work Americans and troubled businesses.

Senate Majority Leader Mitch McConnell warned on the Senate floor Thursday that it was “highly likely” lawmakers would need to stay beyond Friday and work into the weekend. Because Friday is also the expiration date for a temporary government funding bill, it had been seen as the drop dead date for aid legislation as well.

Congressional leaders on Wednesday signaled they were nearing an agreement on a $900 billion package of economic relief that would include extended unemployment benefits, aid to small businesses and another round of stimulus checks. Leaders hope to attach a coronavirus aid deal to a separate $1.4 trillion bill providing full funding for the government through September 2021.

Pressure is on to provide aid as a resurgence of the COVID-19 triggers renewed lockdown measures and curtails business and consumer activity.

“It is important to have a bridge and some people are definitely going to be impacted without it, but we won’t go into a double dip recession without it,” said Keith Lerner, chief market strategist at Truist Advisory Services, referring to a fiscal package.

“The big story is reflation: Treasury rates, gold, Bitcoin. Within all these connecting parts is the dollar,” Lerner said in an interview. “The market is gaining confidence in the economy being able to get through this.”

December is historically a strong month for stocks, and Lerner sees no reason that won’t hold true in 2020. “The biggest challenge may be that when you have elevated expectations you are more vulnerable to bad news,” he added.

But U.S. economic data published Thursday underscored the need for a fresh round of COVID fiscal spending. New applications for U.S. unemployment benefits rose in mid-December for the second week in a row and hit a nearly four-month high, pointing to rising layoffs and more damage to the economy from a record increase in coronavirus cases. That said, continuing state claims fell 273,000 to a 1.55 million rate, the data show.

“It would appear that the claims numbers are starting to accelerate higher in a further sign that the US labor market is starting to deteriorate, as we look toward 2021,” wrote Michael Hewson, chief market analyst at CMC Markets UK, in a Thursday note.

Separately, the Philadelphia Fed manufacturing index fell 6 points to 26.3 in December from 32.3 in prior month, the regional Federal Reserve said Thursday, slightly above economists expectations of a 24.5 reading, according to a MarketWatch poll. Any reading above zero indicates improving conditions.

However, U.S. home builders started construction on homes at a seasonally-adjusted annual rate of 1.55 million in November, representing a 1.2% increase from the previous month. Compared with last year, housing starts were up nearly 13%. The pace of building permits was the highest in 14 years.

Which companies are in focus?
  • Inc.
    said Thursday it was extending the time customers can make returns and increasing the places where those returns can be made.

  • Shares of Roku Inc.
    were in focus after the media streaming company said it finally struck an agreement to bring AT&T Inc.’s
    HBO Max service to its platform, and that is one more reason to believe in the company’s streaming “leadership,” according to one analyst. Shares gained 1.7%.

  • Shares of Steel Dynamics Inc.
    were down 2.5% Thursday, after the steel producer provided an upbeat fourth-quarter profit outlook, as significant price increases for flat roll steel product offsets increased scrap costs.

  • Home-builder Lennar Corp.
    gained nearly 7% after a strong residential construction report.

  • Coca-Cola Co.
    shares were 0.7% higher after the company said it will cut 2,200 jobs.

  • Shares of recently public company Scopus BioPharma Inc.
    which engages in the development of therapeutics targeting the endocannabinoid system, were up 500% in its second day of being a publicly traded company.

  • Oriental Culture Holding Ltd.
     shares surged Thursday, as the Hong Kong-based provider of collectibles and artwork e-commerce services heads for its third session as a public company.

How are other assets performing?
  • The yield on the 10-year Treasury note
    rose 2.2 basis points to 0.938% after the Fed on Wednesday vowed to keep ultralow rates in place until at least 2023

  • The ICE U.S. Dollar Index
     a measure of the currency against a basket of six major rivals, was 0.8% lower and beneath a key round-number level at 90 and extend its weekly skid toward its lowest levels the spring of 2018.

  • The pan-European Stoxx 600 Europe index
    settled 0.3% higher and London’s FTSE 100 benchmark
     lost 0.3%.

  • Oil futures traded 0.9% higher on Thursday, with the U.S. benchmark
    up 1.1% to $48.33 a barrel.

  • Gold futures 
     for February rose $31.30, or 1.7%, to settle at $1,890.40 an ounce.

  • In Asian trade, Japan’s Nikkei 225 NIK,  closed 0.2% higher, while Hong Kong’s Hang Seng index
    closed 0.1% higher, China’s Shanghai Composite Index
     finished the day up 1.1%.

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