ASX set to jump as Wall Street rises; GameStop slide accelerates
Stocks moved higher in afternoon trading on Thursday (US time), helped by strong company earnings as well as optimism that Washington can reach a deal for another round of fiscal stimulus for the millions of Americans who need it.
In early afternoon trade, the S&P 500 index was up 0.8 per cent, the Dow Jones industrial average has risen by 0.9 per cent and the technology heavy Nasdaq was 0.9 per cent higher. All three Wall Street indexes are on pace for strong weekly gains above 3 per cent. It sets up the Australian sharemarket for a strong start to the day, with futures at 5am AEDT pointing to a jump of 62 points, or 0.9 per cent, at the open.
Shares of the beaten-down companies that have been of intense interest by retail investors were down in early trading. GameStop was down 24.9 per cent, continuing is sharp pace downward following its meteoric rise over the previous two weeks. At about $US69 a share, it’s still far above the $US17 price it fetched at the beginning of the year. It traded as high as $US483 last Thursday. AMC Entertainment was down 12.3 per cent.
Stocks have been mostly rallying this week, an encouraging start to February after a late fade in January. Volatility spiked last month amid worries about the timing and scope of another round of stimulus spending by the Biden administration, unease over the effectiveness of the government’s coronavirus vaccine distribution.
The Russell 2000 index of smaller company stocks rose 1.8 per cent in a sign that investors were growing more confident about the economy’s growth prospects. The yield on the 10-year Treasury rose to 1.14 per cent from 1.11 per cent late Wednesday.
Wall Street continues to be focused on individual company earnings. Shares of eBay and PayPal were up more than 5 per cent, after both company reported results that blew away Wall Street’s expectations.
This will continue to be a busy week for earnings for investors. Ford will report after the closing bell, along with Gilead Sciences, News Corp. and Wynn Resorts.
“We’re really impressed with how corporate America has come through earnings season so far,” said Jeff Buchbinder, equity strategist at LPL Financial.
The performance so far is a surprising and welcome about-face from early projections for weak profits. Tech companies are doing particularly well, but financial and smaller companies are also releasing surprisingly good results, he said.
Analysts were expecting an earnings contraction of about 13 per cent heading into the latest round of quarterly reports, according to FactSet. With about half of companies reporting, the S&P 500 is now showing earnings growth of just under 1 per cent and estimates for both the next quarter and all of 2021 are improving.
In Washington, President Joe Biden urged Democrats lawmakers to “act fast” on his economic stimulus plan but also said he’s open to changes. Democrats and Republicans remain far apart on support for President Joe Biden’s $US1.9 trillion ($2.5 trillion) stimulus package, but investors are betting that the administration will opt for a reconciliation process to get the legislation through Congress.
In economic data, the number of Americans who filed for unemployment benefits fell below 800,000 last week, which was better than economist expectations but still remains high due to the pandemic.
Meanwhile, vaccine distribution continues to move ahead and Wall Street expects an eventual fiscal aid package from Washington to give the economy another jolt.
“Each passing day with a million plus shots going into people arms gets us closer to full reopening,” Buchbinder said. “This economy, we think, will really be rolling in the next couple of months.”
AP
Market Recap
A concise wrap of the day on the markets, breaking business news and expert opinion delivered to your inbox each afternoon. Sign up here.
Most Viewed in Business
Source: Thanks smh.com