Stocks rose on Wednesday as investors waved away a threat by U.S. President Donald Trump not to sign a pandemic relief bill, while the British pound soared on rising expectations of a Brexit trade deal.
In a video posted on Twitter, Trump said the stimulus bill, agreed upon after months of wrangling in Congress, was “a disgrace” and that he wanted to increase “ridiculously low” $600 payments for individuals to $2,000.
Canada’s main stock index rose on Wednesday as the domestic economy grew more-than-expected in October, spurring hopes for a quicker economic recovery, while gains in energy stocks further lifted sentiment.
The Toronto Stock Exchange’s S&P/TSX composite index was unofficially up 41.11 points, or 0.23%, at 17,593.57.
The energy sector climbed 4.4% as oil prices rose more than 2% on Wednesday, boosted by draws in U.S. inventories of crude, gasoline and distillates that lifted investors’ hopes for some return in fuel demand.
Brent crude futures rose $1.12, or 2.2%, to settle at $51.20 a barrel, while U.S. West Texas Intermediate (WTI) crude futures rose $1.1, or 2.3%, to settle at $48.12 a barrel.
U.S. crude inventories fell by 562,000 barrels in the week to Dec. 18 to 499.5 million barrels, the Energy Information Administration said on Wednesday
The materials sector, which includes precious and base metals miners and fertilizer companies, added 1.4% as gold prices jumped as much as 1% on Wednesday, bolstered by a weaker U.S. dollar, while investors kept hopes pinned on a U.S. stimulus package even after U.S. President Donald Trump threatened to not sign the relief bill.
Spot gold rose 0.8% to $1,873.92 per ounce, paring gains of 1%, while U.S. gold futures settled up 0.4% at $1,878.10.
The Canadian economy grew by 0.4% in October from September, which surpassed the 0.3% pace economists had forecast. A flash estimate for November showed further expansion of 0.4%.
The November estimate suggests that the pick-up in coronavirus infections and return of economic restrictions “had yet to significantly curtail activity during that month,” said Ryan Brecht, a senior economist at Action Economics. “The spike in the virus and increasingly stringent restrictions are downside risks to Q1 (first quarter) GDP growth.”
he S&P 500 closed in positive territory on Wednesday as an expected stimulus deal and falling jobless claims prompted investors to put their money into sectors most likely to benefit from the economy re-opening when it recovers from the global health crisis.
While the blue-chip Dow and and small caps led the gains, the tech-heavy Nasdaq ended the session slightly lower.
Economically vulnerable cyclical stocks, which were battered by mandated shutdowns and stand to benefit most from economic recovery, were outperforming.
The rotation into cyclicals reflects a growing confidence in recovery from the pandemic recession, and began in fits and starts after promising late-stage vaccine data was released in early November.
“It’s a very welcoming sign to see rotation into beaten down sectors,” said Matthew Keator, managing partner in the Keator Group, a wealth management firm in Lenox, Massachusetts. “It speaks to the importance to valuation and the importance of diversification.”
“It also speaks to the hope that is out there,” Keator added. “When you see oil pick up and travel and tourism industries pick up, it speaks to the market looking forward and pricing in that hope.”
The possibility of a year-end shutdown of the U.S. government, not to mention the lack of new fiscal stimulus, raised its head after President Donald Trump threatened to veto a $2.3 trillion funding package, which also includes a long-awaited $892 billion pandemic relief deal.
A Brexit trade deal between Britain and the European Union appeared more likely after a senior European diplomat told Reuters that an agreement could be imminent.
A raft of mixed economic data showed a welcome decrease in jobless claims and an uptick in new orders for durable goods, but also a pullback in consumer spending, dropping personal income and fading sentiment as the holiday shopping season nears its end amid a resurgent pandemic.
But languid inflation data provided further assurance that the U.S. Federal Reserve is likely to maintain its accommodative monetary policy at least until 2024.
Unofficially, the Dow Jones Industrial Average rose 113.96 points, or 0.38%, to 30,129.47, the S&P 500 gained 2.72 points, or 0.07%, to 3,689.98 and the Nasdaq Composite dropped 36.80 points, or 0.29%, to 12,771.11.
Drugmaker Pfizer Inc rose following a deal with the United States to supply 100 million additional doses of its COVID-19 vaccine by July.
Merck & Co Inc agreed to supply the U.S. government with up to 100,000 doses of its COVID-19 treatment, sending its stock higher.
Supernus Pharmaceuticals Inc surged after its experimental drug for attention deficit hyperactivity disorder met the main goal of a late-stage study in adults.
Shares of Nikola Corp plunged after it called off a deal to develop electric garbage trucks with recycling and waste disposal firm Republic Services Inc.
American Airlines Group and United Airlines Holdings advanced after revealing plans to bring back furloughed employees this month. The airline industry is hoping to receive about $15 billion in payroll support as part of the pending fiscal relief package.
In Europe, the STOXX index ended 1.1% higher after reports that Britain and the European Union were close to a trade agreement after difficult, protracted negotiations, with a year-end deadline looming.
MSCI’s gauge of global stocks in turn rose 0.63%.
The Brexit trade deal news also boosted sterling, which gained 0.92% against the dollar to $1.35. In a further shot in the arm for the pound, Paris lifted its ban on freight coming from Britain, which it had enacted in response to a fast-spreading COVID-19 variant in the United Kingdom.
Foreign exchange markets broadly reflected optimism toward U.S. fiscal stimulus and global growth. The euro rose 0.12% to $1.2177, while the Australian dollar, considered a riskier currency, advanced 0.81% to $0.7581.
Conversely, the safe-haven U.S. dollar resumed its decline. The dollar index fell 0.05%.
With a Brexit trade deal seeming likely, “investors are looking once again to recovery,” said Garrett Melson, portfolio strategist at Natixis Investment Managers Solutions. “It was being held up by the trade dynamic between Britain and the EU.”
In accordance with Wednesday’s risk-on sentiment, U.S. Treasury yields jumped to their highest level since Dec. 7. They received a lift from the Brexit trade deal developments after having fallen earlier in response to Trump’s stimulus comments.
The yield between two- and 10-year yields steepened to its the widest spread since October 2017. European bond yields largely climbed as well.
Benchmark 10-year Treasury notes last fell 12/32 in price to yield 0.9579%, from 0.918% late on Tuesday.
Reuters
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