Stock ETFs Consolidate on Stimulus Hopes and Unemployment Data

U.S. stocks are mixed to slightly higher again on Thursday as traders consider a larger economic stimulus package and more sanguine vaccine news, pushing aside weak economic data and continuing political turmoil.

The Dow Jones Industrial Average advanced 0.41%, while the S&P 500 gained 0.3%. The tech-heavy Nasdaq Composite is slightly lower on the day as of 12:30 PM EST.

Major stock ETFs are also mixed on Thursday, with the SPDR Dow Jones Industrial Average ETF (DIA) and the SPDR S&P 500 ETF Trust (SPY) slightly higher, and the Invesco QQQ Trust (QQQ) marginally lower.

Investors are optimistic that more coronavirus aid will occur, as President-elect Biden is predicted to release a stimulus plan on Thursday that will include an addition to the recent $600 direct payments, an extension of increased unemployment insurance, and help for state and local governments. The stimulus could be as substantial as $2 trillion, CNN reported.

“Stocks are extending their gains thanks to ongoing stability in the ‘three pillars’ (stimulus, vaccines, and earnings),” wrote Adam Crisafulli of Vital Knowledge in a note. “The $2T number is about inline w/expectations and investors need to watch yields very closely…All the Trump impeachment noise is largely irrelevant to markets.”

Markets are also processing news that vaccine trial data released on Wednesday revealed that Johnson & Johnson’s one-dose coronavirus vaccine is safe and generates a beneficial immune response.

Despite the explosive push higher following previous vaccine news from Pfizer and Moderna, analysts like CNBC’s Jim Cramer see even more upside for stocks once vaccines contain the pandemic sometime this year.

“The market has not priced it in, not at all,” Cramer said Thursday on CNBC’s “Squawk on the Street.” “I think there will be animal spirits of people override even what we’ve seen in the stock market.”

Jobs Data Tempers Stimulus Hopes

While there are a number of positive developments in the news, investors also are considering worse-than-expected jobless claims data, where first-time claims for unemployment insurance reached 965,000 last week, significantly more than a prediction of 800,000 new claims, according to economists surveyed by Dow Jones.

The market also appears relatively stable given that the House members voted to impeach President Trump for a second time, for accusations of insurrection of the the Capitol storming, making Trump the first U.S. president ever to be impeached twice.

Finally, interest rates have been climbing this year amid the prospects of more fiscal stimulus. Inflation expectations have also been picking up recently, which could be a driver for gold ETFs like the VanEck Vectors Gold Miners ETF (GDX).

GDX 1 Year Performance

“We think inflation in the U.S. will be higher than most expect over the next couple of years,” wrote Adam Hoyes, assistant economist at Capital Economics. “At the same time, we think that investors are overestimating how quickly the Fed will allow monetary conditions to tighten. The Fed’s new flexible average inflation targeting framework suggests that it will allow inflation to rise above 2% for a period over the coming years.”

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