US stocks appear set for modest gains at the opening on Thursday after Wednesday’s technology sale on Wall Street.
Overnight, Chinese technology stocks were hampered when the U.S. securities regulator said it had put in place a new law that could lead to the exit of the US market.
Despite the recent pressure on stocks, in our call of the day, Barclays said that “all systems go” with the risk recovery set to continue and global growth set to the fastest pace in four decades.
The bank, in its latest global outlook, said fears of overheating the US economy would not hamper the recovery in risk, urging investors to remain overweight in stocks.
“Yes, the stock multiples expanded in the past year, but much of the recovery was due to the absolutely impressive recovery in profits,” said head of macro research Ajay Rajadhyaksha.
He noted that S&P 500 SPX,
earnings were not expected to reach 2019 levels by at least 2021, but earnings for the fourth quarter of 2020 outpaced those of the previous year. “A complete V-shaped recovery within a year, despite the scenario of continued restrictions related to the pandemic,” he added.
The profit outlook, a consensus of more than 21% growth between 2020 and 2021, was another reason to be optimistic, said Rajadhyaksha.
Stock market valuations may seem high compared to history, but the “scale of positive news expected in the coming quarters means that stocks still don’t look expensive to us,” added Barclays.
The bank maintained an S&P 500 target for the end of 2021 of 4,000 and, within US equities, was overweight in industrial and healthcare sectors, as well as hardware and semiconductors. Strategists added that the assessments seemed more attractive in the UK and the euro area, despite the slow implementation of the latter’s COVID-19 vaccination.
In Europe, the bank is overweight in value stocks, such as financial and commodity-linked stocks, but more selective in cyclical sectors and underweight in defensive sectors.
Even the sale of securities in the first quarter, which threatened to halt the rise, only reflected a brighter growth picture, but Barclays said it remains a risk.
“Admittedly, the fly in the ointment is the sale of bonds and the fear that inflation will force the Fed into an aggressive bullish cycle that crushes the high risk. We think these fears are exaggerated, ”said the bank.
“The bond market did its best to deflect risk recovery in the first quarter. And it failed. “
The graph
The Russell 2000 RUT,
closed below its 50-day moving average (DMA), but more than 20% above its 200-day moving average on Tuesday, for the first time in the index’s 42-year history, the Bespoke Investment Group noted. The index’s worst day in nearly a month ended its longest sequence of closings above the 50-day moving average in 10 years.
Bespoke Investment Group
Four of the five times the index closed below 50-DMA and more than 15% above 200-DMA occurred “at the beginning of multi-year bull markets,” added Bespoke.
The markets
US stock futures ES00,
YM00,
NQ00,
pointed a little higher before the opening, with Nasdaq futures rising 0.2% after the high-tech COMP index,
fell 2% on Wednesday. European stocks fell as concerns about a third wave of coronavirus on the continent remained in focus. Oil prices fell on Thursday morning, after firing upward on Wednesday amid the continued blockade of the Suez Canal.
The buzz
AstraZeneca AZN,
announced updated Phase 3 test data for its vaccine on Wednesday night, saying it is 76% effective in preventing symptomatic COVID-19. The Swedish-British pharmaceutical company originally said on Monday that its vaccine had a 79% effectiveness rate.
H&M HM.B,
and other clothing and footwear brands, including Nike NKE,
and Adidas ADS,
are facing a negative reaction in China for raising concerns about forced labor in the Xinjiang region.
GameStop GME,
The shares suffered their worst day in seven weeks on Wednesday, after fourth-quarter earnings and sales exceeded expectations. The video game retailer’s shares were also downgraded by Wedbush analyst Michael Pachter.
The Suez Canal, one of the most important trade routes in the world, remained blocked by a large cargo ship while efforts to free the ship entered on the third day.
The European Union has put forward proposals for stricter controls on exports of the COVID-19 vaccine to the United Kingdom and other countries with better vaccination rates. The proposals will be debated on Thursday, but tensions between the UK and the EU can be eased by a reported cooperation agreement.
Random readings
The new £ 50 bill from the UK in honor of mathematician Alan Turing will present the “most difficult puzzle of all” at GCHQ.
Good catch: the fisherman rescues a boy trapped in the ice.
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