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Dow Jones Underpinned by Jobs and Housing Data, Final Debate in Focus

DOW JONES, STRAITS TIMES INDEX OUTLOOK:

  • Dow climbed on improving US data, shrugging off election security concerns
  • 30 out of 34 S&P 500 companies delivered positive earnings surprise on Thursday
  • Singapore’s Straits Times Index (STI) may edge higher on opening-up hopes
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Dow Jones Index Outlook:

Wall Street equities shrugged off earlier shocks on election security investigations and closed 0.5% higher on Thursday. Better-than-expected jobs and housing data helped lift optimism about an economic recovery. Meanwhile, the ongoing fiscal stimulus talks remain in focus, however, the likelihood that a bill could be passed before the US election appears to be thin without a blessing from the Senate.

The US existing homes sales registered 6.54k in September, marking its highest reading seen since 2006. On a month-on-month basis, it grew by 9.36% (chart below). Stronger housing data may lift sentiment in the building materials, financial and construction sectors.

Dow Jones Underpinned by Jobs and Housing Data, Final Debate in Focus

Source: Bloomberg, DailyFX

The weekly US jobless claims came in at 811k, registering its lowest reading since the Covid-19 outbreak. Previous month’s figure was revised lower to 866k from 898k, underpinning the resilience of the jobs market.

Asia-Pacific markets seem to trade in mixed sentiment in early hours, with the haven-linked US Dollar and Japanese Yen climbing while the risk-linked Australian Dollar and Norwegian Krone erasing earlier gains. The Nikkei 225 index opened marginally higher. The Australian market is closed for a holiday.

Dow Jones Underpinned by Jobs and Housing Data, Final Debate in Focus

Source: Bloomberg, DailyFX

US corporate earnings continued to be upbeat. On Thursday, 30 out of 34 major US companies released better-than-expected results (table below). So far in the earnings season, more than 80% of the S&P 500 constituents have beaten their EPS forecasts.

On the political front, traders are eyeing the final presidential debate between Joe Biden and Donald Trump to be held at 9am local Singapore time on Friday. Markets appeared to have heavily priced in a Biden-win scenario, rendering them fragile to unwinding activities should the election outcome flip against expectations.

Sector-wise, 6 out of 9 Dow Jones sectors closed in the green, with 73% of the index’s constituents ending higher yesterday. Energy (+3.57%) had a decent rebound overnight as crude oil prices climbed. Financials (+1.99%), industrials (+1.93%) and communication services (+0.82%) were also among the top performers, whereas information technology (-0.52%) and consumer staples -0.49%) werelagging.

Dow Jones Index Sector Performance 22-10-2020

Dow Jones Underpinned by Jobs and Housing Data, Final Debate in Focus

Source: Bloomberg, DailyFX

Technically, the Dow Jones index entered a consolidative period since mid-October and its near-term trend appears to be bearish-biased (chart below). It has tested an immediate support level at 28,040 and has since rebounded. 28,040 is also the 38.2% Fibonacci retracement as drawn on the chart below. An immediate resistance level can be found at 28,390 – the 23.6% Fibonacci retracement. Breaking above 28,390 may open room for more upside towards the next resistance level at 28,960 – the previous high.

Dow Jones IndexDaily Chart

Dow Jones Underpinned by Jobs and Housing Data, Final Debate in Focus

Straits Times Index Outlook:

Singapore’s Straits Times Index (STI) has rebounded from September’s low of 2,450 on improving market sentiment and hopes for further relaxation in Covid-19 measures. The number of new coronavirus cases has fallen to single digits from low double digits, lifting hopes for more lockdown unwindings. The Singapore government aims to enter a ‘phase 3’ stage by year-end to allow more activities to resume.

Technically, the STI appears to be supported by the 20-Day Simple Moving Average (SMA) line, while capped by its 50-Day SMA recently (chart below). Breaking above the 50-Day SMA will likely open room for more upside potential with an eye on 2,600.

Straits Times Index Daily Chart

Dow Jones Underpinned by Jobs and Housing Data, Final Debate in Focus

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— Written by Margaret Yang, Strategist for DailyFX.com

To contact Margaret, use the Comments section below or @margaretyjy on Twitter