DJIA : Why it`s Rising ?
(Thu, 6 August 2020). Disney beat earnings expectations, the dollar weakened, and Congress moved closer to a relief package: the perfect storm to push stocks higher. Disney earnings, the weaker dollar and Congess` latest stimulus are helping markets ahead of the bell this morning.
The Dow Jones Industrial Average (DIJA) skyrocketed on Wednesday. Disney beat earnings expectations by a mile, sending the stock nearly 10% higher. The dollar remains weak, giving a boost to international stocks in the Dow Jones index. The U.S. stock market is poised for fireworks today. The Dow Jones Industrial Average (DJIA) surged nearly 250 points to shoot past the 27,000 level. There are three simple reasons for optimism on Wall Street today.
Corporate earnings are coming in way better than expected. Disney beat on profit last night. The dollar has weakened to a two-year low, boosting international profits for US companies. Congress and the White House inch closer to a relief package this week. Altogether, these factors are driving investors back into risk-on mode. Global stock markets jumped overnight, and the Dow Jones Industrial Average (DJIA) joined the party on Wednesday morning. The S&P 500 rallied 0.59% to 3,326.16, while the Nasdaq edged 0.38% higher to 10,983.27. U.S. stocks are on track for their fourth-straight day of gains. In the same breath, gold surpassed the $2,000 mark for the first time ever.
1. Disney beats expectations thanks to Disney+
Analysts were expecting a painful loss for Disney going into last night earnings call. Instead, the company delivered an adjusted profit of 8 cents per share. Disney stock climbed 9% this morning, boosting the entire Dow Jones index. Despite a brutal $3.5 billion hit to its Parks revenue this quarter, investors think the worst is now over for Disney. Across the board, earnings have been nowhere near as disastrous as many feared. Apple, Alphabet, Facebook, and Amazon all beat expectations last week, which goes some way to justifying the impressive bounce in the stock market.
2. Dollar weakness delivers stock market boost
Those same companies will also benefit from a weaker dollar. The dollar index has slumped to a two-year low as U.S. real rates decline. Goldman Sachs predicts a 5% weaker dollar in trade-weighted terms through the next 12 months. The weak dollar is a positive for giant corporations who make their money in foreign markets. When they repatriate their earnings from Europe or Asia, they get a better exchange rate. This isn’t likely to end any time soon, either.
3. Congressional relief package could buoy the Dow
Lastly, Congress and the White House are closing in on an agreement for the next relief package. Speaking last night, Treasury Secretary Steven Mnuchin said he’s hoping for an agreement by the end of the week. On the other side of the aisle, Speaker of the United States House of Representatives Nancy Pelosi also expressed hope for an agreement this week. We have to have an agreement and we will have an agreement. The deal is likely to include a moratorium on evictions through the end of the year. Democrats and Republicans remain split, however, on the issue of unemployment benefits.
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