US Markets close flat after two strong sessions which recovered the volatility of last week. The US SP500 is nearing all-time highs again. It was a fairly mixed night in the US, strong reporting saw Google 9% higher, but Amazon pulled back, the Nasdaq closed slightly in the red, with Energy, Financials and Communication Services stock holding the market up.
Phillip Lowe yesterday reinsured investors that asset prices are not likely to go into a dangerous bubble with the huge amount of cheap money supplied by central banks. We all know how long it can take and how far asset prices can rise before a major pullback. Just go look at the SP500 between 2009 and 2020. We saw a record amount of Government debt and FED QE over that period, and the index rose for 10 years. Over that period we saw pullbacks be the general trend stayed in place until COVID-19 fear saw it wipe off almost 50%.
So, in the long to medium term, it is all about stimulus, markets are likely to hold or rise as long as there is more cheap money at the end of the tunnel. This will continue to help sentiment towards equities and therefore further upward movement is on the table.
The XJO is expected to dip on open, following a U.S market that was reluctant to make fresh highs, needing a breather instead. We may see a similar lackluster trading day from our own market as we too are trading at virtually our post-fall highs. On the other hand, U.S futures have pushed into the green this morning, and if they hold or make further gains our market may push through.
The last few days have seen an explosive rally from our lows (and the bottom of the channel) at roughly 6500. This momentum should help us get through our post-fall highs at roughly 6850 eventually, be it today or the coming weeks.
US shares closed higher overnight, though the gains fell off towards the end of the session. US economic data was quite positive overnight, with Services PMIs and Jobs numbers better than expected. We also saw another US oil inventory read show a bigger drawdown than expected; which led to gains in oil and oil producers.
The democrats are trying to force through their $1.9trn stimulus proposal without Republican support and markets, who love stimulus, will be hoping they succeed. Healthcare and Utilities were the sectors to close lower overnight, while Oil and Gas rocketed on the back of strong oil prices; every other major sector was flat.