Morning Minutes 1/7/2020

Morning Minutes

Stocks Climb With Consumer Spending and Employment In Focus

January 7, 2020

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Market Commentary By:
Colin Cieszynski, CFA, CMT
Chief Market Strategist
ccieszynski@siawm.com
+1 (647) 282-4428

Building on yesterday’s new all-time high for the Dow Industrials, US index futures are on the rise this morning gaining 0.3% to 0.8%. The NASDAQ, which trailed behind its peers yesterday, is leading the way higher today. Overseas market action has been mixed with the Nikkei rallying 1.6%, the Dax climbing 0.4%, the FTSE falling 0.4% and the Hang Seng dropping 0.5%.

Investors have been responding positively to the news that the US congress has confirmed Joe Biden’s election as the next US President and also confirmation that the Democrats won both seats in the Georgia senate runoff vote giving it control of the Senate. Markets appear to be seeing this result as potentially opening the door to more fiscal stimulus. The US 10-year treasury yield is trading back above 1.00% and the US dollar is bouncing back against other major paper currencies, indicating positive sentiment toward the US at the moment.

A number of sales and earnings are out this morning which have helped to shed some light on consumer spending habits of late. Costco reported December same store sales jumped 10.7% from a year ago, boosted by increased sales of foods and alcoholic beverages. This trend was confirmed by better than expected results from packaged food producer Conagra ($0.81 vs street $0.73) and alcoholic beverage producer Constellation Brands ($3.09 vs street $2.39). Drugstore chain Walgreens Boots also beat the street on EPS ($1.22 vs street $1.03). On the other hand, Bed, Bath and Beyond is down nearly 14.0% premarket after reporting disappointing results ($0.08 vs street $0.19).

In economic news, US weekly claims numbers were better than expected both for initial (787K vs street 800K) and continuing (5.07M vs street 5.20M) claims. This may partly offset yesterday’s disappointing decline in ADP payrolls heading into tomorrow’s US and Canadian employment reports. For US Nonfarm Payrolls, the street is expecting an increase of 71K for December, down from November’s 245K increase, and an unemployment rate of 6.8%. For Canada’s employment report, also due at 8:30 am EST on Friday, investors are expecting a 27.5K decline in jobs for December, down from a 62.1K increase in November, and an unemployment rate of 8.6%.

  

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