US stocks appear to have modest gains when they open on Thursday after Wednesday’s technology sell-off on Wall Street.
Overnight, Chinese technology stocks were hammered as the U.S. stock regulator said it has implemented a new law that could lead to the withdrawal of U.S. markets.
Despite recent pressure on stocks, ours call of the day, Barclays said “all systems work” with continued risk recovery and global growth set for its fastest pace in four decades.
The bank, according to its latest global outlook, said fears about overheating the US economy would not slow the risk rally, and urged investors to stay overweight in equities.
“Yes, the equity multiples have widened over the last year, but much of the concentration has been due to the absolutely impressive profit recovery,” said Ajay Rajadhyaksha, head of macro research.
He noted that S&P 500 SPX,
earnings were not expected to reach 2019 levels until at least 2021, but fourth-quarter 2020 earnings exceeded those of a year earlier. “A full V-shaped recovery in one year despite the context of pandemic-related restrictions,” he added.
The earnings outlook, a consensus for more than 21% growth between 2020 and 2021, was another reason to be bullish, Rajadhyaksha said.
Equity market valuations may seem high relative to history, but “the scale of expected positive news in the coming quarters means stocks still don’t look expensive to us,” Barclays added.
The bank maintained an S&P 500 target at the end of 2021 of 4,000 and, within US equities, was overweight in industrial and healthcare, as well as in hardware and semiconductors. Strategists added that the ratings seemed more attractive in the UK and the euro area, despite the slow deployment of the COVID-19 vaccine in the latter.
In Europe, the bank is overweight in value stocks, such as financial and commodity-linked stocks, but more selective in cyclical and low-weight defensive sectors.
Even first-quarter bond sales, which threatened to slow the rally, only reflected a brighter growth outlook, but Barclays said it would remain a risk.
“It is true that the flight of the ointment is the transfer of bonds and the fear that inflation will force the Fed to a cycle of aggressive hiking that crushes the risk rally. We believe that these fears have been exaggerated “, said the bank.
“The bond market did its best to derail the rise in risk 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, it noted Bespoke Investment Group. The worst day of the index in almost a month ended with the longest streak of closures above the 50-day moving average in ten years.
Tailor-made Investment Group
Four of the five times the index has closed below its 50-DMA and more than 15% above its 200-DMA occurred “in early multi-year bullish markets,” Bespoke added.
The markets
US stock futures ES00,
YM00,
NQ00,
pointed slightly higher ahead of the open, with Nasdaq futures up 0.2% after the COMP index
fell 2% on Wednesday. European stocks declined as concerns about a third wave of coronaviruses on the continent remained focused. Oil prices fell in the early hours of Thursday, after soaring on Wednesday amid the continued blockade of the Suez Canal.
The buzz
AstraZeneca AZN,
announced updated data from the phase 3 trial of its vaccine 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 an efficacy rate of 79%.
H&M HM.B,
and other clothing and footwear brands, including Nike NKE,
and Adidas ADS,
they face a backlash in China to raise concerns about forced labor in the Xinjiang region.
GameStop GME,
stocks suffered their worst day in seven weeks on Wednesday, after fourth-quarter profit and sales lost expectations. Shares of video game retailer 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 a third day.
The European Union presented proposals for tougher controls on COVID-19 vaccine exports to the UK and other countries with better vaccination rates. The proposals will be debated on Thursday, but tensions between the UK and the EU could be eased through an informed co-operation agreement.
Random readings
The new £ 50 UK note in honor of mathematician Alan Turing will include the “hardest GCHQ puzzle”.
Good catch: the fisherman rescues a child stranded on ice.
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