Nasdaq and the S&P 500 updated their all-time highs on Thursday, while the Dow broke above 30,000 again for a while. However, the stock indexes took different routes by the end of the session, as the S&P ended lower. The bullish sentiment was driven by hopes that a COVID vaccine would revive the economy. On the other side, bears pointed to downbeat economic data and Pfizer’s cut of supply target.
The tech-oriented Nasdaq rose 0.23%, the Dow added 0.29%, while the S&P 500 fell 0.06%. Seven of the 11 major sectors within the S&P moved higher, with energy being the best performer.
The US Labor Department data showed that the number of US citizens applying for unemployment benefits dropped last week against expectations, but maintained high amid restrictions. Still, economists argue that the decline might have been influenced by Thanksgiving Day, which could have interfered with the way the government smoothens seasonal fluctuations from the data. Initial jobless claims fell 75,000 to 712,000 last week, while economists expected an increase to 775,000.
Separately, the Institute for Supply Management (ISM) said that its services index dropped to 55.9 in November, which is the lowest figure since May. This is the second month of decline as the new restrictions are putting pressure on non-manufacturing businesses.
The pandemic has a profound impact on consumer behavior. The new restrictions have rushed the digital transformation, with many companies and smaller retailers seeking to go online to adapt to the new conditions. To put it into context, e-commerce in the US surged 10% (as a % of total retail sales) in the first two months of the lockdown measures introduced in March. It took about 10 years for the e-commerce industry to achieve that rate. Even when the pandemic fades out, the new behaviors are here to stay.
The coronavirus crisis has affected the way people work and study as well. Home office work is promoted as the new norm, while e-learning has become prevalent in many regions during the pandemic. Salesforce’s bet on Slack reflects an increased interest in remote work. As for e-learning, even in China, where the restrictions were lifted sooner than elsewhere, tutoring services firm TAL Education Group saw an annual increase of 65% in long-term subscriptions in the second quarter.
Despite bleak non-manufacturing data, the sentiment was lifted by stimulus hopes, as US Senate Majority Leader Mitch McConnell revealed the Congress members made progress in reaching a compromise on the new coronavirus relief bill.
In individual corporate news, Boeing surged 7% after Ryanair ordered 75 more 737 MAX planes. United Airlines will also restart 737 MAX flights.
Tesla added an additional 4% after Goldman Sachs upgraded the stock to “buy” ahead of the stock’s addition to the S&P 500 index.
Pfizer fell over 2% after it said that it would produce only half of its COVID vaccine doses than the initial target, citing problems with raw materials.
In Asia, stocks are mostly bullish in early trading on Friday, as investors are waiting for the US nonfarm payrolls report. The bullish momentum was capped by Pfizer’s update.
At the time of writing, China’s Shanghai Composite is down 0.03%, but departing from session lows. The Shenzhen Component is up 0.46% after opening lower.
Hong Kong’s Hang Seng Index has gained 0.20%, and South Korea’s KOSPI has added 1.31%.
Japan’s Nikkei 225 closed 0.22% lower, and Australia’s S&P/ASX 200 gained 0.28%. Australian retail sales rose 1.4% month-on-month in October, up from September’s 1.1% growth but still failing to reach the expected 1.6% rate.
In the commodity market, oil prices are increasing to save the week, as OPEC+ members agreed to continue the production cuts to deal with a drastic decrease in demand amid a global coronavirus crisis. Still, the compromise didn’t reach expectations, as OPEC, led by Saudi Arabia, and Russia agreed to ease the record production cuts by 500,000 barrels per day but failed to agree on a broader policy for the rest of 2021. Thus, OPEC+ will meet every month to review the figure. All in all, oil prices are poised to become more volatile next year. At the moment, WTI is up 1.30%, and Brent has gained 1.56%. Both brands are set to end the week higher, though way lower than weekly highs.
Gold continues to recover, as investors welcomed the cautious stimulus optimism. The metal is now up 0.22% to $1,845.
In FX, the US dollar extended losses amid stimulus hopes. The USD Index is down 0.10% to 90.618. It fell below 91.000 for the first time since April 2018. EUR/USD is up 0.13% to 1.215. A Reuters poll showed that the bearishness in the US dollar would likely last another six months amid increased appetite for risk assets.
The pound has secured gains against both majors as the UK and the EU have reportedly reached a compromise on fisheries.
