TODAY ON WALL STREET: The rally keeps on going

08/06/2020 | 05:10am

Despite the context of uncertainty, U.S. indices keep rising, with the S&P 500 posting gains for a fourth straight day yesterday. It is now about 1.7% below its record. Almost everything is going up, and not just the shares, but also gold and oil.

Investors are now waiting for the publication of U.S. employment figures for July – which are due on Friday - ignoring the warning signals. They continue to project an economic recovery based on a return to normalcy, but have more pessimistic projections than the scenario they hope to see. Markets are carried by vaccine hopes, a low comparison basis and flood of liquidity. To investor’s credit, the complicated macroeconomic assumptions during the Covid-19 have generally proved wrong so far.

Uncertainty should continue in the near term, with the US presidential election looming, unemployment figures and U.S.-China tensions.

Yesterday, the ADP private sector employment survey for July showed only 167,000 new job creations compared to an expected 1.2 million, but the previous month's balance was revised up sharply to 4.314 million new jobs compared to 2.369 million previously.

The ISM Services Index in July rose to 58.1, the highest since March 2019, against 55 expected and after 57.1 in June.

Meanwhile, Democrats and the Republicans still haven’t hashed out their differences on a new coronavirus relief package to release funds to millions of unemployed Americans.

Today on the agenda, we have German factory orders and the Bank of England's rate decision, the Challenger study on job cuts and weekly unemployment registrations in the United States.

Romain Fournier
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