U.S. Benchmarks Finish Strongly Despite Turbulence

November 24, 2020 11:50 AM
Equity Index futures

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Monday's Close

E-mini S&P 500 Futures (December): Settled at 3576, up 21.75

E-mini Nasdaq-100 Futures (December): Settled at 11,905.25, down 0.50

U.S. benchmarks worked through gyrations yesterday morning to finish strongly. Call it a hangover from Friday’s late selling and an early struggle to chew through major 3-star resistance, coupled with the U.S. Dollar reversing losses. Strength has been fairly broad since, despite Big Tech’s and healthcare’s hesitance to join. Apple shed 2.97% yesterday, while Microsoft, Amazon, Facebook, Alphabet, and many drug manufacturers all failed to finish in the positive. Although U.S. benchmarks all have extended gains overnight, it’s the Russell 2000 Small Cap Index leading the bunch after closing at a fresh record high and topping it by as much as 1.7%. A theme we’ve discussed is the continued trickle of vaccine news, which has powered the reopening stocks; Energies +7.09%, Financials +1.88%, and Industrials +1.64% were the best performers yesterday.

On the political front, as we’ve said before, markets like fewer uncertainties. President Trump authorized the start of transition to President-elect Biden. Furthermore, Biden has called on former Fed Chair Janet Yellen as his Treasury Secretary. Ultimately, the market may feel like it knows what to expect and is finding solace in these maneuvers.

There’s no denying that Covid-19 is currently ravaging the country (and globe). Something to think about; national, state, and local governments, along with the media, have ramped up the cause for caution ahead of Thanksgiving to discourage large gatherings and a vicious cycle of spreading. We could see some of that headline news flow dissipate after Thanksgiving and it could quickly bring a wave of bullish sentiment.

U.S. Flash PMIs crushed expectations yesterday morning. Manufacturing PMI was 56.7, the best increase since 2014, versus 53.0 expected and 53.4 last month. Services PMI was 57.7, the best since 2015, versus 55.0 expected and 56.9 last month. Given the data, it would certainly make sense to see the U.S. Dollar gain ground on the news and the Dollar Index reverse from the 92 floor. Although Manufacturing was solid in Europe, the Services sector contracted for the third month in a row and its worst yet at 41.3. This morning, German Ifo Business Climate and Current Assessment nudged out expectations. This coupled with vaccine news bringing tailwinds to emerging market currencies, the Dollar has again found itself on its back foot and this is supportive to risk assets.

U.S. Case Shiller Home Price Index was due at 8:00 a.m. CT and Consumer Confidence followed at 9:00 a.m. CT, along with Richmond Manufacturing. St. Louis Fed President Jim Bullard spoke at 10:00 a.m. CT, NY Fed President John Williams was at 11:00 a.m. CT, and Fed Governor Richard Clarida was due at 11:45 a.m. CT. Traders should also keep an eye on comments from the ECB: with President Christine Lagarde at 8:00 a.m. CT and the more dovish Executive Board Member Philip Lane at 11:45 a.m. CT, traders look for hints of new measures in December.

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