U.S. Stocks Set To Open Higher As Traders Bet On New Stimulus Package

Coronavirus Aid Package Gets Back Into Spotlight

Republicans and Democrats look ready to continue negotiations on the new coronavirus aid package. Treasury Secretary Steven Mnuchin has recently suggested that the current administration may agree to a stimulus package of as much as $1.5 trillion, bringing the size of the potential bill closer to the Democrats’ proposal of $2.2 trillion.

U.S. House Speaker Nancy Pelosi stated that serious differences remained between the positions of Democrats and Republicans after a phone call with Steven Mnuchin.

However, the market believes that both sides have started to move closer to each other and that a badly-needed stimulus bill will be negotiated soon.

S&P 500 futures are gaining ground in premarket trading as another round of monetary stimulus will provide additional support to stocks.

ADP Employment Change Report Disappoints

The U.S. has just released ADP Employment Change report for August which indicated that private businesses created 428,000 jobs. Analysts expected that ADP Employment Change report would show that as much as 950,000 jobs were created.

Most likely, continued problems on the coronavirus front have put some pressure on the job market recovery. It will be interesting to see whether this slowdown is confirmed by the upcoming Initial Jobless Claims and Continuing Jobless Claims reports on Thursday and Non Farm Payrolls report on Friday.

At this point, I’d expect that the positive news on the stimulus front will offset the disappointment from the rather weak ADP Employment Change report.

U.S. Dollar Continues To Rebound, Putting Pressure On Commodities

Yesterday, encouraging Manufacturing PMI data provided significant support to the U.S. dollar. The U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, found support at 91.75 and rebounded above 92.50. This rebound was also supported by the positive developments on the stimulus front.

The sudden strength of the American currency put pressure on precious metals, and gold failed to settle above the psychologically important $2000 level. Oil also found itself under pressure, declining closer to the $43 level.

If the U.S. dollar rebound continues, commodity-related stocks may decline even if the broader market rallies.

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