Thursday December 10th

10-12-2020

Stock futures slip as traders eye stimulus talks

U.S. stock index futures moved slightly lower early Thursday as investors continued to assess progress on additional stimulus measures, as well as developments on the Covid-19 vaccine front. Futures contracts tied to the Dow pointed to an opening decline of about 25 points. S&P 500 futures fell 0.3%. Nasdaq 100 futures dipped 0.6%. During regular trading hours on Wednesday stocks rose to record highs. But the gains were ultimately short-lived, and the major averages wound up closing in the red. The Dow closed 105 points lower for a loss of 0.35%. The S&P 500 fell 0.8%. The Nasdaq Composite pulled back by 1.9% for its worst day since Oct. 30. The tech-heavy index also snapped a four-day winning streak. The broader market’s move to the downside was led by the technology sector, with chip stocks, in particular, registering weakness. “Today was classic sector rotation and a resumption of the mean reversion trade that began modestly in September, and is continuing into the end of the year — and we believe, for much longer,” said David Bahnsen, chief investment officer at The Bahnsen Group. Stocks fell from their highs after Senate Majority Leader Mitch McConnell told Politico that Republicans and Democrats were “still looking for a way forward” on additional fiscal aid. McConnell said he wants Congress to pass a coronavirus relief bill with neither legal immunity for businesses nor state and local government relief. Senate Minority Leader Chuck Schumer, D-N.Y., said McConnell’s proposal to move stimulus talks forward without state and local government aid is not in good faith. The House of Representatives passed a government funding extension Wednesday that would keep the federal government running through Dec. 18 and buy time for further negotiations for a bigger relief bill. The ongoing negotiations come as the Covid-19 crisis worsens in the U.S. But the rollout of Pfizer’s vaccine in the U.K., which began on Tuesday, has spurred some optimism. And some Wall Street strategists believe a widely available vaccine will lift stocks to new highs in 2021. “Equities are facing one of the best backdrops for sustained gains next year,” JPMorgan said in a note to clients Wednesday. “We expect markets to be driven by recovery from the COVID-19 crisis at the back of highly effective vaccines and continued extraordinary monetary and fiscal support,” the firm added. JPMorgan’s S&P 500 target for 2021 is 4,400, which implies a nearly 20% gain from the benchmark average’s Wednesday closing price. On the flip side, Commerce Street Capital CEO Dory Wiley believes caution is warranted. He pointed to 90% of stocks on the NYSE trading above their 200-day moving average as an indication that valuations might be stretched. “Timing the market is not always well-advised and paring back can miss out on some gains the next two months, but after such good returns in clearly a terrible fundamentals year, I think taking some profits and moving to cash, not bonds, makes some sense here,” Wiley said. Asia-Pacific markets traded mostly lower Thursday as investors kept an eye on Brexit trade talks as well as ongoing negotiations in the U.S. for a coronavirus relief package. The Nikkei 225 in Japan fell 0.23% to 26,756.24 while the Topix index dropped 0.18% to 1,776.21. South Korea’s Kospi index fell 0.33% to 2,746.46. Hong Kong’s Hang Seng index declined 0.56% in late-afternoon trade. Chinese mainland markets also struggled for gains as the Shanghai composite was near flat while the Shenzhen composite ticked up 0.12% to 2,253.43 while the Shenzhen component added 0.11% to 13,731.34. Oil prices rose in early trade on Thursday, buoyed by a Covid-19 vaccine rollout in Britain and the imminent approval of a vaccine in the United States, which could spur a rebound in fuel demand, despite a large build in U.S. crude stocks last week. U.S. West Texas Intermediate (WTI) crude futures rose 23 cents, or 0.5%, to $45.75 a barrel at 0200 GMT, while Brent crude futures climbed 21 cents, or 0.4%, to $49.07 a barrel. Prices were little changed overnight. Gold fell on Thursday, hovering close to a one-week low hit in the last session, with its appeal dented by overall optimism for a vaccine-led economic rebound. Spot gold slipped 0.3% to $1,833.40 per ounce, after falling as much as 2.5% on Wednesday. U.S. gold futures were down 0.1% to $1,837.40.