Equity bulls regained momentum on Thursday despite continuing increase on Covid-19 cases and a weak jobless claims number, reports Adam Button

U.S. stock indices made a late session push higher Thursday, led by financials and energy despite another surge in U.S. Covid19 cases hitting their highest level since April. There were 34,500 new infections for a second straight day and higher than expected jobless claims did not stop improved risk appetite from rebounding as U.S. bank stocks led ahead of an expected relaxing of capital rules.

Just as the weight of the continued rise in U.S. Coronavirus cases finally pulled down risk trades on Wednesday, the key price levels held up:

  • The Dow Jones Index held up atop the start of the down gap from March 6.
  • SPX tested the 200-day moving average before closing well above it.
  • VIX fell 5 points after failing to cross the 100-day moving average
  • U.S. crude oil remained underpinned above the $37 lows.
  • The DAX found persistent support above the Mar 18 trendline support.

One narrative to keep an eye on is masks. Some U.S. leaders are increasingly coming around to the idea that masks are imperative to spark any kind of recovery. Vice President Pence was seen in a mask Wednesday in a rare shift. Business leaders are talking more about masks as a way to restore confidence and a major upside risk is that talk resonates with President Trump. It would be a major U-turn for the President but his poll numbers are dropping and his re-election depends on successful restart of the economy.

At the same time, the true level of economic activity is murky. There is an increasing focus on high-frequency data like hours worked from Homebase. It shows a recent dip in hard-hit states and that poses a big risk for the reopening story.

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