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Markets remained uncertain during Thursday as the weekly job data shows no improvements. Instead, more Americans have filed for unemployment. Analysts believe this weakening job data will provide fodder to the Biden administration to clear their proposed $1.9 fresh stimulus.
On Thursday, January 14, the US stock market indices ended marginally lower amid mix set of data. On one hand, President-elect Joe Biden proposed a massive stimulus of $1.9 trillion to overcome the challenges of COVID-19 vaccine distribution as well as supporting households and businesses.
On the other hand, the job loss data hinted at fear and the weakening labor market. The weekly job report from the Labor Department showed a surge in the number of Americans making first-time claims for unemployment. This comes at a time of simultaneous resurgence in the COVID-19 cases.
Although the S&P 500 remain upbeat earlier during the day in hopes of stimulus, it lost steam by the closing session. Speaking to Reuters, Emily Roland, co-chief investment strategist at John Hancock Investment Management said:
“There’s a tug-of-war going on between the prospects for further fiscal stimulus, as a result of Democratic control of the Senate, and a jobs market that has a long way to go before it heals. You have these competing forces going on which are keeping markets range-bound.”
Some market analysts have asked the Biden administration with such a massive stimulus package. But Roland says that the weak job data can provide fuel “for Biden to potentially market this plan. Everybody’s waiting to hear the details … Whether it’s $1 trillion or $2 trillion, that’s a massive amount of fiscal stimulus,” she added.
Are US Stock Market Investors Prepared for Profit-Booking?
The stock market has had an unprecedented rally over the last year after the market crash of March 2020. All of the three indices surged to new highs as we entered in 2021. Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut said that the market has already gained ahead of the stimulus.
Pavlik suggests that investors might be headed for some profit-booking going further. Chuck Carlson, chief executive officer at Horizon Investment Services, called the new stimulus package an “overkill”. Carlson suggested there could be potential downsides to the spending plan. He added:
“There’s some realization that throwing another $2 trillion into the mix is overkill. There is that underlying concern that inflation is going to get rekindled and this amount of money is certainly a concern.”
US Federal Reserve Chair Jerome Powell has also assured that there is no interest rate hike coming anytime soon.