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Written by: Edward Moya | OANDA
US stocks are rising once again on stimulus hopes. The House passed the bill to increase stimulus payments from $600 to $2000, clearing the 2/3 majority needed for passage as 44 Republicans voted alongside Democrats. The bill now goes to the Republican controlled Senate and it is unclear what will happen next. Senate Majority Leader McConnell will have to decide if he will present this bill for a vote. Even if the effort for bigger checks fails now, the goal posts have been moved and the Biden administration will have a better chance of passing additional stimulus once he is inaugurated.
What complicates the stimulus debate is the upcoming Georgia Senate runoff races. If a Senate vote is called, both Georgia Senators Perdue and Loeffler will have to decide if they support the President's initiative to increase stimulus payments. Unemployment remains elevated in Georgia rising from 227,700 in October to 296,200 in November and that could motivate many to vote.
Risk appetite is limited as thin trading conditions persist and will likely consolidate unless the prospects of a stimulus stem out of the Senate. The Senate might make a counteroffer and that could provide some upside for global equities.
Stocks pared some gains after Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases delivered cautious comments that the January levels of the virus could be worse than December. The Christmas surge is expected to deliver the last peak of the virus and should raise expectations for more lockdowns over the next few weeks.
Apple shares rose to a record high as investors held off on the cyclical rotation trade. The stay-at-home economy is still here and will be here for at least a couple more quarters.
Case Shiller
The October S&P CoreLogic Case-Shiller index posted the largest increase in housing prices since 2014. The 20-city report showed a 7.95% rise year-over-year as strong demand, tight inventories, and low rates keep the housing market on fire. This housing data is rather old and did yield any new insights for the bright spot of the US economy.
Oil
Crude prices rose as dollar weakness resumed on fresh prospects of additional stimulus. Thin trading conditions should make oil prices consolidate near the upper boundaries. If the headlines on the virus front start to deteriorate in Asia, that could be the excuse for traders to hit the sell button. South Korea's daily death toll rose to a record and Thailand warned stricter measures could be coming.
The next big move for crude will likely stem from the January 4th OPEC+ meeting that should pave the way for another gradual increase in production. Russia is jockeying for a 500,000 bpd increase in February, but that might be difficult if the lockdown situation worsens globally.
Gold
Gold prices are trying to hold onto gains as the dollar softens. It is all about stimulus for gold and right now the uncertainty remains as to when will we see more. President Trump’s push to increase stimulus checks to $2,000 may die at the Senate, but it has helped the Biden administration find out which lawmakers are willing to work with him. The prospects of more stimulus seem likely, investors will just have to wait until Biden takes office.
Gold prices appear poised to consolidate this week as the shortened trading week will be accompanied with thin liquidity.
Bitcoin
Bitcoin appears to be consolidating ahead of another run towards a massive psychological level. Bitcoin momentum was relentless on the break of the $20,000 level and that could happen again with the $30,000 level. Volatility will remain elevated during as thin trading conditions in the past have delivered some of the larger moves.
In past years, after a strong fourth quarter, Bitcoin has often delivered a massive pullback. That will be tested over the next couple of weeks.