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  • The S&P 500 and Dow both advanced while the Nasdaq 100 dropped.
  • Sentiment was for the most part underpinned by stimulus hopes, pandemic optimism and strong US data.

It was a mixed day for US equity markets; the S&P 500 and Dow Jones Industrial Average continued their recent grind higher amid broadly positive risk appetite, both finished the day up about 0.1%, but the Nasdaq 100 dropped 0.4%. All major bourses saw selling pressure into the close.

In terms of sectoral performance, energy stocks performed the best, ending the session up 4.3%, as crude oil markets posted solid gains. Communications services was the next best performer, up 2% on strong Google earnings, while health care and consumer discretionary performer the worst.

In terms of larger individual movers; Amazon ended the day 2.0% lower as former the surprise stepping down of former CEO Jeff Bezos outweighed optimism regarding the firm’s stronger than anticipated earnings released after the cash close on Tuesday. Alphabet, meanwhile, surged more than 7% following its own strong earnings report on Tuesday.

Driving the day

Growing optimism that the US Congress is going to deliver further fiscal stimulus was the main factor underpinning market sentiment on Wednesday. In terms of the latest on that front; following a meeting between Congressional Democrats and US President Joe Biden in the afternoon, it was agreed (as expected) that Congress should “go big” on stimulus. One key development on the day was increasing indications that Biden might be willing to limit eligibility for stimulus cheques, although he reiterated that the $1400 per cheque number was not up for negotiation. Moderate Democrat Senator Manchin said that he believes the Republicans will be willing to compromise on stimulus and that they know their $618B offer (made by 10 Republicans earlier in the week) would be too small. Separately, a Biden advisor said prior to the US cash open that he thought the ultimately agreed on stimulus was likely to be around the $1.3T mark.

Elsewhere, pandemic related updates out of the US have for the most part been positive; the White House announced that the government is set to open 100 Covid-19 vaccination sites across the country and that the country is now averaging more than 1.3M jabs per day. Meanwhile, the Centre for Disease Control (CDC) said that Covid-19 infections and hospitalisation appeared on a downwards trajectory, thus deaths are expected to decrease in the coming weeks. Moreover, the prevalence of foreign variants of the virus (such as the more deadly and transmissible UK variant and more vaccine-resistant South African variant) are still thought to be fairly low.

Sticking with the positives; US data was strong. ADP National Employment, a private proxy for the official headline NFP number, beat expectations to come in at 174K (forecasts were for a gain of 49K jobs), while ISM Services PMI also beat expectations, coming in at 58.3 versus consensus forecasts for 57.4. The ISM Services PMI report also contained very strong subindex numbers, most notable of which was a jump in the employment index to 55.2 from 48.7 in December (which bodes well for Friday’s NFP number).