Dow Jones futures are starting the week on the back foot as traders are unsure about the coronavirus stock market’s direction. Investors need to brace themselves for a raft of earnings reports and figure out how the coronavirus’s current spread will impact the future of the stock market. Traders also need a new catalyst to push the stocks higher, and this new catalyst needs to be in the form of assurance in terms of a stimulus package.
The European stock market had more good news today as the policymakers have finally decided to support a massive stimulus package. Netherland, Austria, Denmark, and Sweden have thrown in the towel. They are ready to support the 390 billion Euro rescue fund to be distributed as a grant. The final decision will be formalized at 4:00 pm today, and a tough negotiation process will come to an end.
Geopolitical tensions continue to rise, and this time it is the U.K. that has decided to take a stand alongside its allies against China. Foreign Secretary, Dominic Raab will update Parliament today on the U.K.s intention to suspend its extradition treaty with Hong Kong due to the new national security law imposed by Beijing. The U.S., Australia, and Canada have already suspended their extradition treaties with Hong Kong. Retaliation is the name of the game, and it is only a matter of time before U.K. companies experience a backlash from China as Beijing is bound to respond with its counter measures.
In the global stock markets, we had a bit of a mixed session, South Korean Kospi index slipped by 0.06% while the Shanghai and the HSI indices both scored gains and jumped by 2.51% and 0.08%.
The Next Stimulus Package
The Dow Jones futures, along with the S&P 500 futures are likely to be highly focused on the new possible stimulus package in the U.S. Talks over new stimulus proposal between the top Republicans and Democrats will begin today.
The Republicans’ will commence the talks with Democrats with their $1 trillion stimulus plan while the Democrats have a $3.5 trillion stimulus proposal. Donald Trump has talked about $2 trillion stimulus package.
Gold Prices Ease Off
Gold prices are holding on to their $1,800 price level. The door is open for the precious metal to continue its journey towards the all-time high of $1,923. Record ETF flow, loose monetary policy approach are likely to continue to provide more tailwind for the gold prices.
Dow Index and S&P 500 Index: Market Breadth
The stock market’s breadth shows that bulls gained additional momentum. 50% of the Dow Jones stocks have traded above their 200-day moving average, a 3% improvement from the day earlier.
The S&P 500 stocks also show more bullish tailwind for the coronavirus stock market rally. 52% of the shares are trading above their 200-day moving average.
Dow Jones and S&P 500 Futures Today
Dow Jones futures are trading lower by 150 points. Investors are hopeful about the breakthrough talks on the E.U. stimulus package, while traders are also keeping an eye on the possible U.S. stimulus package.
The Dow Jones futures have started to retrace from their recent highs. However, the Dow Jones’ price is still trading above the 50 and 100-day simple moving average SMA. As long as the Dow Jones price continues to trade above the 200-day SMA on a daily time frame, the DJ30’s price can continue its bull trend.
The S&P 500 index, which shows the broader strength of the stock market, is holding on to its gains. The S&P 500’s price is consolidating, but it is also trading above all the essential averages: 50, 100, and 200-day SMA. This confirms that the bulls are in control of the price.
Below is the S&P 500 daily chart
Stock Market Rally
The S&P500 index closed in positive territory on the final trading of last week. It posted gains of 0.28%. Three sectors of the S&P 500 closed in negative territory. The remaining nine sectors closed in a positive zone. The health care sector led the gains for the S&P 500 stocks, while the consumer discretionary sector was the biggest drag.
The Dow Jones index fell 62.6 points or by 0.23%. 17 stocks dropped while 13 shares recorded gains. Goldman Sachs GS -1.5% was the biggest decliner, while Home Depot HD +0.9% recorded most of the profits.
The NASDAQ composite, a tech-savvy index, also advanced 0.18% on Friday.