U.S. Benchmarks Are Still Risk-On

October 12, 2020 08:40 AM
Covid aid package looks unlikely before the election
Congress will focus on SCOTUS nominee
ES and NQ are at their highest levels since Sep 3
Stock Market Update for Traders

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Friday's Close

E-mini S&P 500 (December): Settled at 3473.25, up 35.75 on Friday and 134 on the week

E-mini Nasdaq-100 (December): Settled at 11,724.75, up 185.75 on Friday and 491.50 on the week

U.S. benchmarks are picking up right where they left off Friday; risk-on. Although Coronavirus aid talks continue in Washington and President Trump raised his price limit, a deal before the election looks less likely by the day. House Speak Pelosi, as expected, criticized the White House’s latest attempts as each side postures for elections less than a month away. Despite the Federal Reserve’s steadfast narrative that fiscal measures are necessary to keep the economic recovery moving, White House Economic Advisor Larry Kudlow said over the weekend he does not think the recovery is dependent on it. Congress will need to shift gears and focus on confirming President Trump’s Supreme Court pick Amy Coney Barrett. This could deflect attention from passing a stimulus package, but the market seems less focused on when the aid comes and instead on pricing in the fact its coming.

Thursday night, as China came back from holiday, the Yuan hit the highest level since April 2019 against the U.S. Dollar. This brought a tailwind to commodities and in particular the metals sector. Over the weekend, the People’s Bank of China cut the reserve requirement for banks when trading currencies from 20% to zero. This slapped the Yuan below Friday’s low as its down 0.76% on the session versus the U.S. Dollar.

Both the S&P and NQ are at the highest level since the September 3rd selloff. There are only two foreseeable headwinds between now and the end of the year that would keep these two indices from setting fresh record highs. The first would be comments that fiscal measures have hit an insurmountable roadblock and the other is a rising U.S. Dollar. Traders must keep a pulse on the Chinese Yuan and the reversal at the onset of the week. Today, there is a deluge of comments coming from Eurozone leaders. Tomorrow, we look to U.S. inflation data via CPI.

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