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Dow trades to records but retreats in first full day of Biden presidency

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U.S. stock benchmarks turned south Thursday morning, after initially extending the rally to fresh records, as investors pondered President Biden’s prospects for combating the COVID-19 pandemic and boosting economic recovery with his legislative agenda.

How are stock benchmarks performing?

  • The Dow Jones Industrial Average
    DJIA,
    -0.02%

    fell 12 points, or less than 0.1%, to 31,180, but had hit an intraday record peak at 31,241.20.

  • The S&P 500 index
    SPX,
    -0.01%

    was flat at around 3,852, a gain of less than 0.1%.

  • The Nasdaq Composite Index
    COMP,
    +0.20%

    climbed 29 points, or 0.2%, to reach 13,487, and briefly hit a record intraday record at 13,524.23 before paring gains.

On Wednesday, the Dow, the Nasdaq Composite the S&P 500 and the small-capitalization Russell 2000 index
RUT,
-0.45%

closed at record highs.

What’s driving the market?

U.S. equity markets have been buttressed at record heights by the prospects of greater fiscal aid to tackle the economic damage from COVID-19 and better strategies under Biden for vaccinating Americans at a more rapid clip and limit the spread of the pandemic.

The U.S. has the highest reported death toll at 46,162, or about a fifth of the global total. The country added at least 184,453 new cases on Wednesday according to a New York Times tracker, and counted at least 4,357 deaths. 

In his first full day of his presidency, Biden will sign 10 executive orders, in addition to more than dozen signed a day ago. He also is expected to invoke the Defense Production act to accelerate the manufacturing and delivery of personal protective equipment, including N95 masks, gowns, swabs, rapid test kits and all material needed to deliver vaccines.

Investors remain fixated on the 46th president’s proposed $1.9 trillion COVID relief package, a day after he took office. It is unclear that he will be able to get his bill through Congress in its current form without amendments.

Optimism surrounding equities has largely rested on further funds to rebuild the economy and on the hope that Biden will be able to mend political divisions that widened during the past four years.

“The new US President will try to heal domestic issues with respect to economic and social divisions. In addition to that, his handling of international relationships is likely to be much more tactful than his predecessor Mr. Trump,” wrote David Madden, market analyst at CMC Markets UK, in a daily research note.

Meanwhile, market participants were taking in the European Central Bank latest policy statement, which made no changes to interest rates or its asset-buying program after moving last month to bolster its efforts to support the eurozone economy. 

The ECB said its Governing Council left its deposit rate at negative 0.5% and its main refinancing rate at 0%, and it also affirmed that it would maintain the “envelope” for its pandemic emergency purchase program at 1.85 trillion euros and would continue monthly purchases under the program until at least the end of March 2022. The ECB also will continue its asset purchase program at a pace of 20 billion euros a month.

ECB President Christine Lagarde held a news conference at 8:30 a.m. Eastern, saying that she is “monitoring very carefully exchange rates,” referring to the strength of the euro
EURUSD,
+0.36%

against its counterparts which can undercut the central bank’s accommodative policies.

In U.S. economic reports, weekly jobless benefit claims dropped 26,000 to 900,000 in mid-January, but remain elevated. Meanwhile, U.S. home builders started construction on homes at a seasonally adjusted annual rate of 1.67 million in December, representing a 5.8% increase from the previous month’s figure, the U.S. Census Bureau reported Thursday.

Separately, the Philadelphia Fed Manufacturing Index, a reading of business activity in the Federal Reserve district, rose to 26.5 in January from 9.1 in the prior month.

Which stocks are in focus?
  • Alcoa Corp
    AA,
    -8.32%

     shares fell in the extended session Wednesday after the aluminum company’s quarterly results topped Wall Street expectations but it warned that performance could worsen should its markets not recover.

  • United Airlines Holdings Inc.’s stock
    UAL,
    -6.09%

    was in focus after Q4 results late Wednesday.

  • Alaska Air Group Inc
    ALK,
    -2.21%

     disclosed Thursday that it will receive $533 million after it reached agreement last week with the U.S. Treasury on an extension of the Payroll Support Program (PSP).

  • Shares of PayPal Holdings Inc. 
    PYPL,
    +0.32%

    are up Thursday after BTIG analyst Mark Palmer upgraded the stock to buy from neutral, citing traction for the company’s cryptocurrency platform.

  • Shares of Celsion Corp. 
    CLSN,
    +62.35%

     shot up toward a six-month high in very active trading Thursday, putting the cancer-drug development company on track to more than double in two days.

How are other markets faring?
  • The yield on the 10-year Treasury note
    TMUBMUSD10Y,
    1.112%

    edged 1.9 basis points higher to 1.11% as investors expect more reflation. Yields and bond prices move in opposite directions.

  • The ICE U.S. Dollar Index
    DXY,
    -0.29%
    ,
    a measure of the currency against a basket of six major rivals, was down 0.3% at 90.201.

  • Oil futures traded lower, with the U.S. benchmark
    CL.1,
    -0.62%

    1 moving 0.4% lower at $53.08 a barrel on stimulus expectations. Gold futures were bouncing around near a two-week high, but recently off less than 0.1% with the February contract
    GCG21,
    -0.20%

    at $1,866.10 an ounce. 

  • In Europe, the Stoxx 600 Europe index
    SXXP,
    +0.24%

    gained 0.4%, while London’s FTSE 100
    UKX,
    -0.06%

    was trading 0.2% higher.

  • In Asian trade, the Shanghai Composite
    SHCOMP,
    +1.07%

     rose 1.1%, China’s CSI 300
    000300,
    +1.62%

    closed up 1.6%, while Hong Kong’s Hang Seng Index 
    HSI,
    -0.12%

    slipped 0.1% lower and Japan’s Nikkei 225
    NIK,
    +0.82%

     closed 0.8% higher.

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