Stimulus Hopes And Support From The Fed Push Stocks Higher

The Fed Promises To Provide Support As Long As It Is Needed

S&P 500 futures are gaining ground in premarket trading as traders bet on the continued support from the Fed and the new round of stimulus.

Yesterday, the Fed left the rate unchanged and stated that it was committed to using its full range of tools to support the U.S. economy.

The Fed will continue to buy bonds at a pace of $120 billion per month until inflation averages 2% and unemployment returns to normal levels. Inflation is nowhere near Fed’s target so markets can count on Fed’s support for the upcoming years.

Many traders expected that the Fed would try to put pressure on yields of longer-dated bonds, but it looks like central bank decided that the current program was sufficient enough to support the economy and markets.

U.S. Lawmakers Are Close To A Stimulus Deal

In addition to support from the Fed, stocks are supported by the recent progress on the stimulus front.

Currently, Republicans and Democrats are discussing the details of a $900 billion coronavirus aid bill. Recent reports suggest that the bill will include $600 – $700 stimulus checks, unemployment benefits and support for small businesses.

Some traders suggest that some of the stimulus checks may go directly to the stock market through retail trading accounts, which will provide an additional boost to stocks.

Yesterday’s Retail Sales report indicated that consumer activity has started to slow down so the economy clearly needs another stimulus package. Most likely, U.S. lawmakers will try to reach a deal before Christmas although they have previously signaled that they were ready to continue negotiations until the end of the year if necessary.

Initial Jobless Claims Increased To 885,000

The U.S. has just provided Initial Jobless Claims and Continuing Jobless Claims reports.

Initial Jobless Claims report showed that 885,000 Americans filed for unemployment benefits in a week. Analysts expected Initial Jobless Claims of 800,000. Continuing Jobless Claims declined from 5.76 million to 5.5 million.

Meanwhile, Building Permits grew by 6.2% month-over-month in November while Housing Starts increased by 1.2%. The housing market remains strong but the job market is already under pressure from the second wave of the virus.

For a look at all of today’s economic events, check out our economic calendar.