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Uncertainty About Stimulus May Lead to Choppy Trading on Wall Street
US Market
The major U.S. index futures are pointing to a roughly flat open on Wednesday, with stocks likely to show a lack of direction after ending the previous session modestly higher.
Traders may be reluctant to make any significant moves amid continued uncertainty about a new stimulus bill.
White House chief of staff Mark Meadows told CNBC on Tuesday that House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin have made “good progress” in talks but noted they “still have a ways to go” before an agreement is reached.
Pelosi and Mnuchin are expected to talk again today as they seek to reach an agreement on a new relief package before next month’s elections.
However, Senate Majority Leader Mitch McConnell revealed on Tuesday that he has warned the White House not to make a deal with Pelosi before the elections.
Despite staying somewhat sluggish at times during the day’s session, U.S. stocks closed modestly higher on Tuesday as investors continued to hope lawmakers will eventually agree on a stimulus plan sometime soon.
Stronger than expected earnings reports from Procter & Gamble (PG) and Travelers (TRV) also contributed to the firm trend in the market.
Reports that Moderna’s (MRNA) coronavirus vaccine could be available for emergency use in December if it gets positive results from interim trial in November further aided sentiment.
As stocks held in positive territory throughout the session, the major averages all ended on a firm note. The Dow, which was up more than 300 points at one stage, ended with a gain of 113.37 points or 0.4 percent at 28,308.79, the Nasdaq climbed 37.61 points or 0.3 percent to close at 11,516.49 and the S&P 500 advanced 16.20 points or 0.5 percent to 3,443.12.
House Speaker Nancy Pelosi said that Democrats and the White House have moved closer to a coronavirus stimulus agreement. Pelosi is scheduled to discuss again with later in the afternoon.
Pelosi downplayed the importance of an end-of-Tuesday deadline she had set to strike an agreement and added that she would continue to have discussions with Treasury Secretary Steve Mnuchin.
The Democratic leader said lawmakers would have to come to a deal and write a bill before the end of the week in order to have legislation ready before Election Day.
Procter & Gamble reported a 19 percent jump in profit for the first quarter of fiscal 2021 from last year.
Travelers said its third quarter profit came in at $3.12 per share, compared to $1.43 per share in the prior year.
IBM Corp. (IBM) reported third quarter earnings of $1.70 billion or $1.89 per share, up from $1.67 billion or $1.87 per share last year. That was in line with expectations. IBM shares tumbled more than 6%.
DuPont (DWDP), McDonalds (MCD), Coca-Cola (KO), Apple (AAPL) and Honeywell International (HON) closed with strong gains.
In economic news, data released by the Commerce Department showed building permits in the United States rose 5.2 percent from a month earlier to a seasonally adjusted annual rate of 1.553 million in September of 2020, the highest level since March 2007. The rise was also above market expectations of 1.52 million.
Meanwhile, housing starts in the country rose 1.9 percent to a seasonally adjusted annual rate of 1.415 million units in September 2020, from a downwardly revised 1.388 million in the previous month. The rise in September was below market expectations of 1.457 million units.
U.S. Economic Reports
Cleveland Federal Reserve President Loretta Mester is scheduled to speak about monetary policy at the Money Macro and Finance Society Annual Monetary and Financial Policy Conference virtual event at 10 am ET.
At 10:30 am ET, the Energy Information Administration is due to release its report on oil inventories in the week ended October 16th.
Crude oil inventories are expected to decrease by 1.0 million barrels after falling by 3.8 million barrels in the previous week.
San Francisco Federal Reserve President Mary Daly is scheduled to speak in a moderated Q&A session at the Professional Speechwriters Association World Conference virtual event at 12 pm ET.
Also at 12 pm ET, Minneapolis Federal Reserve President Neel Kashkari is due to speak about “Amending the Minnesota State Constitution to Guarantee a Quality Education for All Students” at the “From ‘Adequate’ to ‘Quality’: A Constitutional Amendment for Minnesota Students” virtual event.
Dallas Federal Reserve President Robert Kaplan is also scheduled to speak in a moderated Q&A session on “The Current State of the Economy” at a virtual event held by the Houston Hispanic Chamber of Commerce at 12 pm ET.
At 1 pm ET, the Treasury Department is due to announce the results of its auction of $22 billion worth of twenty-year bonds.
Richmond Federal Reserve President Thomas Barkin is also scheduled to participate in a “Rural Virginia’s Economic Recovery” panel at the Virginia Rural Center Governor’s Summit on Rural Prosperity virtual event at 1 pm ET.
At 2 pm ET, the Federal Reserve is due to release its Beige Book, a compilation of anecdotal evidence on economic conditions in the twelve Fed districts,
Stocks in Focus
Shares of Snap Inc. (SNAP) are skyrocketing in pre-market trading after the Snapchat parent reported a surprise third quarter profit on better than expected revenues.
Auto retailer AutoNation (AN) is also likely to see initial strength after reporting third quarter results that exceeded analyst estimates and increased its share repurchase authorization.
On the other hand, shares of Netflix (NFLX) may come under pressure after the video streaming giant reported weaker than expected third quarter earnings.
Europe
European stocks have fallen on Wednesday, with concerns about tightening coronavirus restrictions in parts of Europe and the U.S. stimulus impasse keeping investors worried.
Prospects for an economic relief package in the next two weeks dimmed markedly on Tuesday after U.S. Senate Majority Leader Mitch McConnell revealed that he has warned the White House not to make a deal with House Speaker Nancy Pelosi before the November presidential election.
While the U.K.’s FTSE 100 Index has tumbled by 1.4 percent, the French CAC 40 Index is down by 1 percent and the German DAX Index is down by 0.8 percent.
The British pound has advanced in response to EU Chief Negotiator Michel Barnier’s optimistic comments about a post-Brexit trade deal.
Barnier told the European Union parliament the EU was committed to making the necessary compromises required to agree a deal over coming weeks.
Swiss food-and-beverage giant Nestle was little changed after raising its full-year guidance for organic sales growth.
Software AG shares have moved to the downside. The German software giant reconfirmed its 2023 ambitions, including plans to reach 1 billion euros of revenue and expand operating margin to a 25 to 30 percent range.
Precious metals mining company Fresnillo has also slumped after the company cut its full-year gold production guidance.
Centamin shares have also plunged. The gold mining company posted lower gold production and sales for the third quarter compared with the previous quarter.
Meanwhile, Sweden’s Ericsson has soared after its quarterly core earnings beat market estimates. Randstad has also jumped. The world’s largest staffing company reported better than expected core earnings for the third quarter.
British postal service and courier company Royal Mail has also risen after launching a new parcel pick-up service across Britain.
In economic releases, U.K. consumer price inflation accelerated in September as restaurant and café prices increased driven by the Eat Out to Help Out scheme, a government report showed.
Inflation climbed 0.5 percent annually in September, up from the 0.2 percent increase seen in August. That came in line with expectations.
Asia
Asian stocks ended mostly higher on Wednesday after the White House and Democratic Party negotiators said they are willing to continue their discussions over U.S. stimulus measures.
Sentiment was also bolstered after a Reuters report said that AstraZeneca Plc’s Covid-19 vaccine trial in the United States is expected to resume as early as this week.
Chinese shares finished marginally lower as the yuan touched a two-year high on signs of robust economic recovery and expectations of a victory for U.S. Democrat presidential candidate Joe Biden next month. Hong Kong’s Hang Seng Index climbed 0.8 percent to 24,754.42.
Japanese shares eked out modest gains ahead of the first-half reporting season and the start of an extraordinary session of parliament next week.
The Nikkei 225 Index rose 72.42 points, or 0.3 percent, to 23,639.46 on hopes of an earnings recovery, while the broader Topix closed 0.7 percent higher at 1,637.60.
Rohm surged 4.8 percent after the electronics components maker upgraded its earnings estimate. Similarly, biotechnology company Takara Bio soared 5.4 percent after forecasting robust earnings. Exporters Honda Motor, Panasonic, Canon and Nissan surged 2-5 percent.
Australian markets ended slightly higher on hopes that U.S. lawmakers could reach a stimulus compromise by the end of the week. The benchmark S&P/ASX 200 Index inched up 7.20 points, or 0.1 percent, to 6,191.80, while the broader All Ordinaries index ended up 6.30 points at 6,403.10.
The big four banks rose between 0.8 percent and 1.6 percent, while mining heavyweights BHP and Rio Tinto advanced 0.6 percent and 1.2 percent, respectively.
Santos climbed 2 percent and Oil Search rallied 3.5 percent after crude oil prices rebounded from recent lows.
Orora surged 8 percent after the packaging firm provided an upbeat trading outlook for its North American business. Rare-earths producer Lynas Corp jumped 4.2 percent after it posted an 8.1 percent rise in first-quarter neodymium and praseodymium (NdPr) output.
Seoul stocks rose for the third straight session on growing optimism that U.S. lawmakers are nearing a deal on a stimulus package. The benchmark Kospi gained 12.45 points, or 0.5 percent, to finish at 2,370.86.
Internet portal giant Naver rose 2.6 percent, while chipmaker SK Hynix lost 1.6 percent and automaker Hyundai Motor declined 1.2 percent.
Commodities
Crude oil futures are falling $0.57 to $41.13 a barrel after climbing $0.64 to $41.70 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,927, up $11.60 compared to the previous session’s close of $1,915.40. On Tuesday, gold rose $3.70.
On the currency front, the U.S. dollar is trading at 104.69 yen compared to the 105.50 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.1860 compared to yesterday’s $1.1822.
