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Vladimir Zernov
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U.S. Stock Market

Traders Wait For New Upside Catalysts

S&P 500 futures are losing ground in premarket trading as traders wait for new catalysts that can push stocks to new highs.

The market believes that U.S. will soon deliver a new round of stimulus which will be close to Biden’s $1.9 trillion stimulus package proposal. Democrats are ready to push the plan through Congress without Republican support, and it looks like discussions will be focused on eligibility details for $1,400 stimulus checks. Earlier, U.S. Treasury Secretary Janet Yellen stated that she supported such checks for workers earning $60,000 per year.

In addition to stimulus expectations, the market is supported by the latest improvements on the coronavirus front in the U.S. and in the world in general. The number of new cases continues to decline which is bullish for the market.

At this point, the key question is whether stimulus optimism is fully priced in or stocks have more room to run in the near term. While S&P 500 futures are pointing to a lower open, it remains to be seen whether the market is ready for any pullback.

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30-Year Treasury Yield Failed To Settle Above 2.00%

Yesterday, 30-year Treasury yield made an attempt to settle above the psychologically important 2.00% level as traders sold bonds on expectations that the new round of stimulus will boost inflation.

Tomorrow, traders will have a chance to see whether inflation is moving higher as the U.S. will provide inflation reports for January. Both Inflation Rate and Core Inflation Rate are projected to grow by 1.5%.

If inflation is higher than expected, 30-year Treasury yield may move above 2.00% and put some pressure on precious metals which offer no yield. It remains to be seen whether higher yields will be able to put any pressure on stocks as the market optimism remains strong.

Oil Pulls Back After Rally

WTI oil failed to settle above the $58 level and pulled back as traders took some profits off the table after a major rally.

Vaccine hopes, Saudi Arabia’s production cuts and U.S. stimulus expectations served as bullish catalysts that pushed oil from the $52 level to the $58 level.

At this point, oil and oil-related stocks may need additional catalysts to move higher as the market may start to pay more attention to supply/demand balance at the beginning of the second quarter when production from Saudi Arabia and other OPEC+ countries will start to return to the market.

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

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