Dow is trading at record highs as worst jobless claims reports since August support more tax assistance

U.S. stock indexes traded higher on Thursday morning and the Dow Jones hit an intraday high, despite a report showing weekly jobless claims hit their highest level since last August, as trade lockouts were again imposed in some states to fight the coronavirus pandemic.

Investors, however, are focused on the prospects for further financial assistance from the government, with President-elect Joe Biden due to outline the details of a new fiscal stimulus on Thursday evening.

What are the main benchmarks doing?
  • The Dow Jones Industrial Average DJIA,
    + 0.37%
    rose 144 points, or 0.5%, to 31,203, hitting an intraday high of 31,223.78.

  • The S&P 500 SPX index,
    + 0.27%
    traded 12 points, or 0.3%, up to 3822.

  • The Nasdaq COMP composite index,
    + 0.60%
    climbed 74 points, or 0.6%, to 13,203.

The Dow DJIA,
+ 0.37%
fell less than 0.1% on Wednesday just before a House vote to impeach President Donald Trump for inciting the Jan.6 riot on Capitol Hill, while the S&P 500 SPX,
+ 0.27%
and Nasdaq Composite COMP,
+ 0.60%
finished slightly higher.

What drives the market?

CNN reported that Biden, who is scheduled to speak in Wilmington, Del., Is set Thursday night to present a spending program that would include more direct payments to American families and significant state and local funding.

Another round of large direct payments to households could be the trickiest part of the package, Hussein Sayed, chief market analyst at FXTM, said in a note, as most Republicans and some Democrats in the Senate are against “going. too far”.

“On the other hand, going for a small package will disappoint investors and lead to profit taking in the stock markets,” he said. “Finding the right balance will not be easy.”

Discussions over additional federal spending come as a report on weekly unemployment claims in the United States in early January was the highest since late August, increasing from 181,000 to 965,000 as the COVID-pandemic 19 caused further lockdowns across the country, the Labor Department reported on Thursday. Economists had estimated on average that the demands would be 800,000.

The United States added at least 230,476 new cases Wednesday, according to a New York Times tracker, and counted at least 3,922 deaths, after setting a record of more than 4,400 on Tuesday, the most in a single day since the start of the epidemic.

However, higher unemployment benefit claims figures in early January may help strengthen the argument of those who argue that the economy needs more budget support as the virus spreads again.

“At one point, tough jobs like we saw this morning may serve as a tinder for those calling for a correction, but the market seems to be of the view that the light at the end of the tunnel remains in sight, despite laborious deployment of vaccination. Wrote Mike Loewengart, investment strategist at E-Trade Financial, in emailed comments.

“Plus, a darker jobs report than excepted jobs translates into a higher likelihood of a full stimulus package, which perversely acts as a tailwind for the market,” he said.

Optimism for further aid has supported bullish forecasts for market performance in 2021. Indeed, David Kostin of Goldman Sachs predicts the S&P 500 will end 2021 at 4300.

Meanwhile, investors will also be keeping an eye on bond yields, which rose last week and earlier in the week in a move blamed on fears that another fiscal package could fuel inflation. This could create problems for stocks, as higher yields make stock valuations more difficult to justify. Investors might also be concerned that a pick-up in inflation would see the Federal Reserve relax its bond-buying program faster than expected.

In other economic news, the US import price index rose 0.9% in December and 0.4% in December, excluding fuel prices.

Investors will also pay close attention to a speech by Fed Chairman Jerome Powell at 12:30 p.m. EST.

Which companies are targeted?
  • BlackRock Inc.
    stocks fell 3.7%, after the asset manager, with $ 8.7 trillion in assets under management, reported fourth-quarter earnings and income better than expected.

  • Shars Tesla Inc.
    + 0.29%
    were 1.2% lower. The National Highway Traffic Safety Administration has sent a letter to the electric vehicle maker requesting a voluntary recall of 158,000 Model X units from the 2016, 2017 and 2018 model years due to a possible defect affecting safety functions, including the operation of the rear view camera.

  • Google Parent Alphabet Inc. GOOG share,
    + 0.57%

    + 0.52%
    may be the focus of concern after the company announced it completed the acquisition of fitness tracking company Fitbit. Alphabet’s class A and C shares rose 0.4%.

  • Cisco Systems
    + 0.20%
    the stock was the focus of concern after CNBC reported it was offering a higher bit forAcacia Communications
    + 31.87%.
    Cisco shares lost 0.3%, while Acacia shares jumped 31%.

  • Virgin Galactic SPCE shares,
    + 20.01%
    jumped more than 20% after ARK Investment Management filed with the Securities and Exchange Commission to launch an exchange-traded space exploration fund.

How are other assets traded?
  • The yield on the 10-year US Treasury note TMUBMUSD02Y,
    is up 1 basis point around 1.10%.

  • The ICE US Dollar DXY index,
    + 0.03%,
    a gauge of the currency against a basket of six big rivals, rose 0.2%.

  • Oil futures were trading lower, with the US benchmark CL.1,
    0.3% lower at $ 52.77 per barrel. GC00 Gold Futures,
    were trading 0.6% lower at $ 1,843.70 an ounce.

  • The pan-European Stoxx 600 SXXP index,
    + 0.68%
    was up 0.4%, while London’s FTSE 100 UKX,
    + 0.65%
    was up 0.5%.

  • In Asia, the Shanghai Composite SHCOMP,
    closed down 0.9%, while the Hong Kong Hang Seng HSI Index,
    + 0.93%
    climbed 0.9% and the Japanese Nikkei 225 NIK index,
    + 0.85%
    gained 0.9%

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