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Stock futures are flat after major averages turn positive for the week

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U.S. stock index futures were flat in overnight trading on Wednesday, after the major averages advanced during regular trading to turn positive for the week.

Futures contracts tied to the Dow Jones Industrial Average gained 27 points. S&P 500 futures and Nasdaq 100 futures were marginally higher.

During the session the Dow gained 286 points, or 0.83%, while the S&P climbed 0.82%. The Nasdaq Composite was the relative outperformer, rising 0.92%. Energy was the top-performing S&P group, advancing 3.5% as oil prices rebounded.

Wednesday’s gains built on Tuesday’s strong session, and the major averages have now erased the losses from Monday’s sell-off. The Dow dropped more than 700 points to start the week as rising Covid cases worldwide hit sentiment. The yield on the 10-year Treasury dipped to a five month low of 1.17% at the beginning of the week, which also caused investors to offload equities. On Wednesday the yield on the 10-year rose 8 basis points to 1.29%.

“The truth is investors have been very spoiled by the recent stock market performance,” noted LPL Financial chief market strategist Ryan Detrick. “Incredibly, we haven’t seen as much as a 5% pullback since October. Although we firmly think this bull market is alive and well, let’s not fool ourselves into thinking trees grow forever. Risk is no doubt increasing as we head into the troublesome August and September months.”

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A busy week of earnings will continue on Thursday. AT&T, D.R. Horton, Southwest Air, American Airlines, Abbott Labs and Union Pacific are among the names on deck before the opening bell. Intel, Twitter, Snap and Capital One will post quarterly updates after the market closes.

So far 15% of the S&P 500 has reported earnings, with 88% beating earnings estimates, according to Refinitiv. Of the companies that have reported 84% have topped revenue expectations.

Investors will also be watching the weekly jobless claims number from the Department of Labor on Thursday. Economists polled by Dow Jones are expecting the number of first-time filings to be 350,000, down from the prior reading of 360,000. Existing home sales figures will also be released.

“We expect a continuation of sloppy trading through the seasonally-weak summer months; however, our base case remains that the primary trend over the next 12 months remains higher,” Keith Lerner, chief market strategist at Truist wrote in a note to clients. “The S&P 500, which just made a new record high last week, has gone one of the longest periods of the past decade without so much as a 5% pullback,” he added.

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Opportunities from struggle between the U.S. and China, economist says

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Chinese authorities have promoted the use of the yuan worldwide, while the U.S. dollar dominates global transactions.

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BEIJING — When it comes to the investment outlook, one Chinese economist predicts once-a-century opportunities will emerge from a “struggle for supremacy” between the U.S. and China.

This game-changing window comes from upheaval on both sides, said Liu Yuhui, director of a finance research department at a government think tank, the Chinese Academy of Social Sciences.

China is set on becoming a great nation, he said, while the U.S. has embarked on a dollar-printing policy since the coronavirus pandemic that has changed the financial balance.

That’s according to a CNBC translation of his Mandarin-language speech, titled “The bipolar world under the U.S.-dollar super-expansion cycle — The Chinese capital market’s ‘cognitive revolution.'”

Liu, also chief economist at Tianfeng Securities, was speaking Friday at asset manager ChinaAMC’s investment strategy conference. Founded in 1998, ChinaAMC is one of the country’s largest mutual fund managers and has 1.54 trillion yuan ($240.63 billion) in assets under management.

In Liu’s view, the U.S. is implementing the concept of “modern monetary theory“ (MMT), which holds governments with their own strong currency can print money to support the domestic economy without worrying too much about budget deficits.

One of the most well-known proponents of modern monetary theory is Stephanie Kelton, formerly chief economist for Democrats on the U.S. Senate Budget Committee and a senior economic advisor to Bernie Sanders′ 2016 presidential campaign.

The U.S., under the Trump administration and subsequently the Biden administration, has kept interest rates low and released trillions of dollars into the economy to support growth in the wake of the pandemic.

The stimulus program has drawn criticism for its scale. At conglomerate Berkshire Hathaway’s annual meeting in May, U.S. billionaire Warren Buffett’s longtime business partner Charlie Munger said modern monetary theory might be “more feasible than everybody thought. But I do know that if you just keep doing it without any limit it will end in disaster.”

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Meanwhile in China, the ruling Chinese Communist Party just celebrated its 100th anniversary on July 1, when President Xi Jinping called again for the “great rejuvenation” of China.

To Liu, the government’s stance means policy will focus on ensuring national security and cutting carbon emissions. He emphasized political correctness will be even more critical for investment in light of developments like Alibaba founder Jack Ma’s controversial speech last fall and the subsequent suspension of Ant Group’s IPO.

Mainland Chinese stocks with the highest probability of large gains will be those in the new energy, seed, optics and semiconductor industries, among others, Liu said.

As for digital currencies, on which Chinese authorities have intensified their crackdown this year, Liu cast them in geopolitical terms as well.

“In my view,” he said, “it’s just the U.S.’ way to tempt Chinese capital.”

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Australia stocks set for lower start; bitcoin price rebounds

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SINGAPORE — Shares in Australia looked set to to slip at the Thursday open, with markets in Japan closed for a holiday.

Futures pointed to a lower open for Australian stocks. The SPI futures contract was at 7,290 as compared with the S&P/ASX 200’s last close at 7,308.70.

Concerns over the coronavirus situation in Asia-Pacific may continue to weigh on regional sentiment on Thursday. Australia’s two largest states on Wednesday reported sharp increases in new Covid infections, while Indonesia saw record high deaths from the virus, according to Reuters.

Markets in Japan are closed on Thursday for a holiday.

Meanwhile, the price of bitcoin rebounded after recently falling below the $30,000 mark. It traded at $32,086.50 as of 7:33 p.m. ET Wednesday, according to Coin Metrics.

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Overnight stateside, the Dow Jones Industrial Average gained 286.01 points to 34,798 while the S&P 500 rose 0.82% to 4,358.69. The Nasdaq Composite advanced 0.92% to 14,631.95.

Currencies

The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 92.754 after a recent fall from above 93.

The Japanese yen traded at 110.26 per dollar, weaker than levels below 109.5 seen against the greenback earlier this week. The Australian dollar changed hands at $0.7355, above levels below $0.732 seen yesterday.

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Fauci says vaccinated people ‘might want to consider’ wearing masks indoors

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White House chief medical advisor Dr. Anthony Fauci said fully vaccinated people might want to consider wearing masks indoors as a precaution against the rapidly spreading delta variant in the U.S.

“If you want to go the extra mile of safety even though you’re vaccinated when you’re indoors, particularly in crowded places, you might want to consider wearing a mask,” Fauci said in an interview Wednesday with CNBC.

Some areas of the U.S. are reimplementing mask mandates due to spikes in cases. The more transmissible delta variant now makes up roughly 83% of sequenced Covid-19 cases in the country, according to the Centers for Disease Control and Prevention.

“It’s suggested that you wear a mask when you are indoors in a situation where you have a level of dynamics of virus in the community that’s high,” Fauci said.

He also said U.S. officials are concerned that they are seeing more breakthrough infections in fully vaccinated people in the U.S., even if they are more mild cases.

“That’s something we obviously don’t want to see,” he said, noting that the delta variant was highly transmissible. “This virus is clearly different than the viruses and the variants that we’ve had experience with before. It has an extraordinary capability of transmitting from person to person.”

Variants have increased in transmissibility from the original strain and some are proving to reduce the effectiveness of vaccines.

“Viruses don’t mutate unless you allow them to replicate and spread in the community, you give them ample time and ample opportunity to mutate and you got a new variant,” Fauci said. “The easiest and best and most effective way that we can prevent the emergence of a new variant and crush the already existing delta variant is to get everyone vaccinated.”

In the U.S., 99.5% of Covid deaths are now among unvaccinated people. “That is a statistic that speaks for itself,” Fauci said.

Despite the surge in new cases, Fauci said he doesn’t believe U.S. officials will renew calls for a nationwide mask mandate “because there will be a lot of pushback on that.”

Local counties and private businesses may choose to enforce mask mandates as the delta variant continues to spread in unvaccinated pockets of the country. Currently, almost two-thirds of counties in the U.S. have vaccinated less than 40% of their residents.

Colleges and universities have also taken the question of mandated vaccinations to court. Indiana University recently got the green light from a federal judge to require vaccines for students attending the fall semester.

Fauci said he doesn’t see lockdowns making a comeback anytime soon.

“I don’t see that on the horizon right now,” Fauci said. “What I do see is increased testing and increased local mandates and a big push to get people vaccinated.”

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