- Stocks, Futures boosted after Trump finally signs the original, $2.3 trillion package
- Alibaba shares drop in Hong Kong as the Chinese government cracks down
Key Events
US futures for the Dow Jones, S&P 500, NASDAQ and Russell 2000 and global stocks all popped on Monday, after President Donald Trump, on Sunday, finally signed the $2.3 billion stimulus package into law. The much-anticipated move built on the market's risk-on sentiment provided by the signing of a Brexit deal at the eleventh hour, just ahead of the Christmas holiday.
The dollar slumped and gold and oil edged higher.
Global Financial Affairs
After claiming he was delaying the bill because of the "disgraceful" low figure of $600 in fiscal relief that would be issued to individuals in the original package, Trump authorized the package yesterday, without it containing any changes. This will restore unemployment benefits and avert a partial government shutdown which would have occurred beginning Tuesday.
Though all US contracts are rising this morning, futures on the Russell 2000 advanced about twice as much as the broader market, extending the cyclical rotation.
Energy and carmakers—sectors pressured by lockdowns—led the STOXX Europe 600 higher this morning, in tandem with US small cap, bolstering the case that stocks sensitive to economic conditions are improving.
Almost all the main Asian benchmarks pushed higher. Japan’s Nikkei outperformed, (+0.75%), nearing a three-decade high on holiday-thinned trading. However, the cyclical rotation was not obvious in Japan, as technology stocks rose alongside healthcare, utilities and industrial machinery makers.
Hong Kong’s Hang Seng had the dubious honor of being the only major regional benchmark in the red, (-0.25%), as a selloff resumed, weighed by a regulatory crackdown, in which the PBoC instructed Jack Ma's Ant Group to overhaul its lending and other financial practices even as Chinese regulators have launched an investigation into anti-competitive practices as Ma's other company, internet commerce giant Alibaba Group Holdings (NYSE:BABA).
Shares of Alibaba (HK:9988) listed in Hong Kong plunged for a second consecutive day. The stock dropped 8% this morning on heavy trading volume—despite the company having boosted its share buyback program to $10 billion. Today's move extended the downside breakout of a down sloping H&S top, demonstrating weakness as it lacked sufficient demand to form a proper right shoulder.
On Thursday, ahead of the long holiday weekend, US stocks closed higher, but finished the week lower constrained by stimulus uncertainty.
Yields, including for the US 10-year Treasury note, edged higher. The dollar declined to trade at the bottom of the session.
Yesterday's stimulus news spurred the completion of the second consecutive bearish pattern, as the passage of the largest fiscal aid bill in American history, will flood the economy with cheap cash.
Gold was pushed higher on dollar weakness.
This helped the precious metal complete a bullish flag. However, it found resistance at the channel top, as risk-on siphoned capital away from gold. Note, the flag follows a H&S bottom—both of which threaten the falling channel.
Bitcoin climbed again after yesterday’s first dip in four days.
The decline came after the cryptocurrency posted a new all-time high above $28,000 on Sunday. Yesterday's high upper shadowed-shooting star signaled a pullback, confirmed by the negative divergences in volume and momentum indicators.
Oil rose for a third day.
However, the commodity's RSI has been providing negative divergence. The momentum-based indicator may be topping out, suggesting a pullback in the price.
Up Ahead
- Data on pending home sales and goods trade balance are due from the US on Wednesday.
- Weekly US initial jobless claims figures will be published on Thursday.
- Most global markets are closed Friday for New Year holiday.
Market Moves
Stocks
- S&P 500 futures rose 0.6%.
- The S&P 500 Index rose 0.4% on Thursday.
- Japan’s TOPIX Index rose 0.5%
- South Korea’s KOSPI Index climbed 0.1%.
- China's Shanghai Composite index was steady.
- EuroStoxx 50 futures added 0.5%.
Currencies
- The Dollar Index fell 0.3% to 90.04.
- The yen was at 103.46 per dollar.
- The euro rose 0.3% to $1.2223.
- The pound was little changed at $1.3567.
- The offshore yuan was at 6.5255 per dollar, down 0.2%.
- The Aussie advanced 0.2% to 76.20 US cents.
Bonds
The yield on 10-year Treasuries rose three basis points to 0.95%.
Commodities
- West Texas Intermediate crude fell 0.4% to $48.02 a barrel.
- Gold advanced 0.2% to $1,887 an ounce.