Dow Futures Higher, Gold Hits New Record On Fed Stimulus Bets; ADP July Jobs Data Disappoints

Gold prices continue to rally Wednesday as investors assess the impact of fresh government and central bank stimulus on stocks, currencies and the broader economy.

The Wednesday Market Minute

  • Global stocks push higher, while gold hits fresh all-time highs, as investors look for a new wave of central bank stimulus to support the stalling U.S. economy.
  • San Francisco Fed President Mary Daly says the pandemic will be "longer and more vigorous" than expected, and the domestic economy will need added support until it fully recovers. 
  • The White House, as well as Democratic leaders in Congress, continue stimulus talks Wednesday, with both sides hopeful of a deal that will replace emergency unemployment benefits by the end of next week
  • Gold prices hit a fresh all-time high of $2,030.72 per ounce in overnight trading, while the dollar slumps to a two-year low on foreign exchange markets.
  • U.S. equity futures suggest a softer open on Wall Street ahead of earnings from CVS Health and Moderna before the start of trading and Western Digital after the closing bell.

U.S. equity futures traded higher Wednesday, while gold hit new all-time highs and the dollar continued its months-long decline, as investors looked to Congress and the Federal Reserve for fresh financial support to prop-up the stalling domestic economy. 

Stocks pared gains, however, after private data from payroll processor ADP said 167,000 new jobs were added to the economy last month, a figure that fell well shy of the 1.5 million figure forecast by Wall Street analysts. 

Gold's year-to-date gain of around 33% was extended further in overnight trading as the prospect of another round of stimulus from the Federal Reserve, which San Francisco Fed President Mary Daly was likely needed amid a "long and vigorous" pandemic, penetrated asset prices.

Gold traded at $2,030.72 per ounce in the Asia session, after breaching $2,000 for the first time yesterday, while the dollar slumped 0.5% against a basket of its global peers to trade at a two-year low of 92.79. 

Congress is also inching close to a new wave of support for the stalled U.S. economy, with White House officials vowing to work "around the clock" with Democrats in order to bridge the gap between their $3.2 trillion proposal and the Republican's $1 trillion counter-offer.

"Do we believe that we can get the kind of bold, strong bill that America needs?," Democratic Senate leader Chuck Schumer asked reporters yesterday, who hinted at a conclusion to the talks before the end of next week. "We do". 

With governments and central banks around the world pledging a collective $20 trillion to combat the human and economic costs of the coronavirus pandemic, which has infected more than 18 million people and is killed some 5,900 each day, hard asset prices such as gold and silver have surged amid concern for the degradation of fiat currencies. 

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Stocks, however, are also benefiting from the spending spree, with the S&P 500 trading at levels last seen in early February and poised for further gains again today.

Futures contracts tied to the Dow Jones Industrial Average are price for a 125 point opening bell gain while those linked to the S&P 500, which has gained 2.3% for the year, are looking at a 7 point bump to start the Wednesday session.

The Nasdaq, which closed at its 30th record high of the year Tuesday, is priced for a 10 point opening bell gain.

Benchmark 10-year Treasury bond yields were also active in the overnight session, falling to 0.526% -- and within a few ticks of their all-time lows -- as investors priced in the more then $2 trillion wave of new debt that will be sold between now and the end of the year in order to fund the various coronavirus rescue packages already approved by Congress.

Global stocks, too, were finding more support from government spending, and shrugging-off concerns that the pandemic is starting to accelerate again in major economies around the world. 

Europe's Stoxx 600 index, the region's broadest measure of share prices, was marked 0.5% higher in early trading, despite the euro trading at a new two-year peak of 1.1817 and blunting the value of export-focused stocks, while Asia's MSCI ex-Japan benchmark came to the end of the session with a solid 0.7% advance.

Global oil prices were also firmed, helped out in part by the weaker U.S. dollar and an 8.6 million barrel decline in domestic crude stocks last week, according to data published late Tuesday by the American Petroleum Institute.

WTI contracts for September delivery, the U.S. benchmark, $1.58 higher from their Tuesday close in New York and were changing hands at $43.28 per barrel in early European dealing while Brent contracts for October, the new global benchmark, were seen $1.59  higher at $46.02 per barrel.