Stocks Set To Move Higher As Rally Continues

Initial Jobless Claims Stay At High Levels

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

Initial Jobless Claims report indicated that 793,000 Americans filed for unemployment benefits in a week. Analysts expected Initial Jobless Claims of 757,000.

Meanwhile, Continuing Jobless Claims decreased from 4.69 million (revised from 4.59 million) to 4.55 million.

S&P 500 continue to gain ground after the release of employment reports as traders focus on the upcoming stimulus package.

Yesterday, U.S. Fed Chair Jerome Powell highlighted the need to create more jobs in order to boost the economy and stated that maximum employment would require additional efforts.

He also reminded about the effort to create jobs after the World War Two when the economy had to create jobs for returning soldiers. Clearly, Powell supports Bidens stimulus package proposal and wants to see more investments from public and private sectors.

Importantly, Powell stated that the Fed was not thinking about shrinking the size of its balance sheet which may have a significant negative impact on markets.

Powell‘s comments had no material impact on Treasury yields which declined after recent inflation reports indicated that inflation was not gaining steam. Lower bond yields may provide additional support to stocks which remain investors’ favorite instruments in the low-yield world.

Oil Pulls Back As Traders Take Some Profits Off The Table

WTI oil failed to settle above $58.50 and pulled back despite bullish inventory reports. EIA Weekly Petroleum Status Report indicated that crude inventories declined by 6.6 million barrels and were just about 2% above the five-year average for this time of the year.

Meanwhile, U.S. domestic oil production increased from 10.9 million barrels per day (bpd) to 11 million bpd and remained at comfortable levels for the market. However, it should be noted that additional growth of domestic oil production may put some pressure on prices.

Most likely, oil will need to stabilize after the recent rally before it will have a chance to get to the test of the $60 level. At this point, the market mood remains bullish, so oil and oil-related stocks will need material bearish catalysts to move lower.