The energy sector was the only strong sector overnight, with Oil continuing its rally. Financials, Real Estate, and Industrials managed to see a slight push higher. Whilst the rest of the sectors saw major US indices close in the red.
We are starting to see more and more articles arise that commodities and commodities stocks will perform well as demand should increase as infrastructure building gets underway. This says that materials could come back into favour soon so keep an eye on that space.
Banks have also had a fantastic rally into the US reporting, we will see JPMorgan, Wells Fargo&Co, and Citigroup report tonight. Our banks will also likely follow movements in the US banks over the next week depending on the reports. Especially MQG which is a much closer model to the US banks.
Otherwise, investors will be cautious waiting for more detail around US fiscal stimulus once Joe Biden is sworn in next week. The political unrest in the US over the past week has had no effect on the sentiment in markets. This shows that the market at this stage likes the idea of a majority government and is betting on more fiscal stimulus in the next few months.
XJO is expected to open flat to red this morning following another lacklustre night in the U.S overnight. In addition, their futures sit flat this morning. It is likely that how they move during our session today will dictate whether further losses are made, or we push into positive territory.
Despite stimulus talks progressing, our market seems to be taking lead from the U.S and holding its breath for their reporting season which kicks off tonight. We are sitting at the top the range, consolidating and channelling, looking for direction and its fair to say that the reporting season could bring a change in the tide.
US shares closed slightly lower overnight ahead of an announcement by president elect Joe Biden that will outline his stimulus proposals for the US economy. The proposals are expected to amount to $2 trillion in new spending measures. We will also see a US company earnings reporting season kick-off tonight. Jobless claims data from overnight was much worse than expected, outlining the case for stimulus. Oil & Gas stock were the strongest performers again overnight, with oil prices continuing to climb. Telecoms was the only other sector to close higher on average, with every other major sector falling.
Technically, the SP500 is stalling just below the all-time high resistance level around 3,825; indeed, the overnight high came very close to this level. Still, the index isn’t showing many bearish signs either, as despite closing lower, moves were really quite small. We will need to see either the 3,825 resistance, or potential support around 3,700 break before another directional move will look likely.