The latest data on jobless claims and construction spending in the United States performed poorly on Thursday, raising expectations that the economic recovery will slow and that more stimulus measures will be needed to stimulate the economy to recover from the epidemic. As a result, the dollar index fell below the 93 mark; spot gold rebounded strongly to near the $1730 / oz mark after the previous day's sharp fall as yields on the dollar and Treasuries fell; and all three major indexes of US stocks rose. Among them, the S & P 500 index broke through the 4000 mark for the first time in history. However, some on Wall Street are increasingly concerned that higher taxes by the US government could pose a threat to a rebound in corporate earnings and share prices. The plan outlined by Biden on Wednesday includes about $2 trillion in spending over eight years and raises the corporate tax rate on which it is funded to 28%.
In the United States, a series of economic data were released in the next few days, and the performance of the data was uneven. The manufacturing PMI of ISM in the United States in March was 64.7, higher than the expected 61.3, the highest since December 1983.
The agency commented that the US manufacturing activity index surged to its highest level in more than 37 years in March, driven by strong growth in new orders, in the clearest sign yet that a much-anticipated economic boom may be brewing. Thanks to the $1.9 trillion aid package from the White House and the fact that more and more Americans have been vaccinated against novel coronavirus, many businesses have reopened and the economy is expected to take off this year.
Us GDP is expected to grow at an annual rate of 10 per cent in the first quarter of this year and 4.3 per cent in the fourth quarter of last year. The economy may grow by 7% this year, the fastest pace since 1984. The US economy shrank by 3.5 per cent last year, the worst in nearly 74 years. But a massive fiscal stimulus could push the economy beyond domestic capacity and spark inflation.
However, this was offset by slowing construction spending and an increase in initial jobless claims in the US in the most recent week.
Construction spending in the United States recorded a monthly rate of-0.8% in February, the lowest since May last year.
According to the latest data from the U.S. Department of Labor, the number of Americans applying for unemployment benefits rose to 719000 in the week ending March 27, with an expected 680000, and the previous figure was revised to 684000.
Some agencies commented that although economic activity accelerated and the labor market recovery strengthened, driven by the increase in the scale of vaccination and massive fiscal stimulus, the number of initial claims for unemployment benefits in the United States rose unexpectedly last week. The number of initial claims for unemployment benefits the previous week was 658000, the lowest level since mid-March 2020.
The number of initial jobless claims has rebounded to more than 700000, but the four-week average is still on a downward trend, said Greg, an analyst at Forexlive. Fed policymakers may still be concerned about the high level of initial jobless claims, which were only about 250000-280000 before the outbreak.
It is worth noting that the national employment report released by ADP on Wednesday showed that private employment in the United States rose by 517000 last month, which was also lower than market expectations.
"while ADP is not a reliable indicator of how non-farm payrolls are likely to perform, it paints a picture of an improvement in the job market," Joe Manimbo, senior market analyst at Western Union Business Solutions, said in a research note.
Us jobless benefits and ADP employment data both fell short of expectations or cast a shadow over the non-farm sector due to be released on Friday.
Wall Street analysts expect non-farm payrolls to be released on Friday at 647000.
"given the high market expectations for hiring in March, which is expected to increase by 650000, the dollar is likely to encounter buying news and selling facts," he added.
The dollar fell on Thursday as gloomy unemployment data boosted the outlook for a slowing economic recovery and more stimulus measures.
In early trading in the United States, the dollar index hit a new session low of 92.87, still not far from the five-month high of 93.44 hit on Wednesday.
In the first three months of the year, however, the dollar rose 3.6 per cent against a basket of six major currencies, its best quarterly performance since June 2018, as investors bet on a rapid and strong recovery.
"unless you see significant progress elsewhere, the dollar will remain stable," said Juan Perez, currency strategist and trader at Tempus. "COVID-19 is not over yet, and our extermination has just touched the surface."
"the higher-than-expected growth in initial jobless claims is depressing news because the market had hoped that the number of unemployed would decrease, which is the biggest problem in novel coronavirus's epidemic economy," Perez said.
On Thursday, the yield on the 10-year Treasury note fell 7 basis points to about 1.68 per cent. The benchmark interest rate hit a 14-month high of around 1.77 per cent last week.
Gold prices have been boosted by more than 1 per cent as dollar and US bond yields fall, while gloomy unemployment data raise the prospect of a slowdown in the economic recovery and more stimulus measures that could boost demand for gold as a hedge against inflation.
In the US market, spot gold was as high as $1729.74 / oz, up nearly $24 from its daily low. Gold hit $1677.61, its lowest level since March 8, on Wednesday. Most markets are closed on good Friday, April 2.
"the higher-than-expected number of initial jobless claims could lead to more stimulus measures and a slower pace of recovery," said Phillip Streble, chief market strategist at Blue Line Futures. A weaker dollar and weaker yields are helping gold, he added.
The S & P 500 broke through the 4000 mark for the first time on Thursday, as Wall Street continued to move forward on a steady basis after President Joe Biden unveiled an infrastructure plan.
The s & p 500 rose 0.8% to an intraday high of 4009.88. The Dow climbed 120 points. The Nasdaq composite index rose 1.4%.
The stock market fluctuated after Biden proposed his trillions of dollars worth of infrastructure plans. The plan includes spending on roads, bridges, green energy and water system upgrades. This is the second major spending boost since Biden signed a $1.9 trillion relief and stimulus bill on March 11.
Craig Johnson, technology market strategist at Piper Sandler, said: "as the dawn at the end of the coronavirus tunnel approaches, the reopening of the US economy continues to support the stock market. Fiscal and monetary policy support is still unprecedented and is evident at this critical moment. "
The plan outlined by Biden on Wednesday includes about $2 trillion in spending over eight years and raises the corporate tax rate on which it is funded to 28%.
However, some on Wall Street are increasingly concerned that tax increases could pose a threat to a rebound in corporate earnings and share prices.
Bank of America equity strategist Savita Subramanian said the market may still need to digest the tax increases included in the plan, which could have a negative impact on the stock market.
"I think the market is digesting the good news on infrastructure," Subramanian said. "I don't think the market must have taken into account the negative factor of how we are going to pay for it."
