Stock Futures Rally as Traders Bet on Volatile Election Season
September 28 2020 - 9:37AM
Dow Jones News
By Anna Isaac
U.S. stock futures rose Monday, suggesting that the market may
recover some ground following four consecutive weeks of
declines.
Futures tied to the S&P 500 rose 1.4%. The benchmark is down
almost 6% so far this month. Contracts tied to the tech-heavy
Nasdaq-100 index ticked up 1.9%. The gains came as investors said
last week's selloff was overdone.
"There's been a lot of froth in markets recently that has been
washed out. The underlying fundamentals are all moving in the right
direction," said Hani Redha, a portfolio manager at PineBridge
Investments. "We are in the early stages of a multiyear expansion.
It will remain volatile in the coming weeks, but overall the trend
will remain upward."
The Cboe Volatility Index, a measure of expected swings in the
S&P 500, climbed on Monday. Investors' concerns about rising or
elevated levels of coronavirus infections, the uneven pace of
economic recovery, political risks and continued tensions between
Beijing and Washington have increased the turbulence in the market
this month.
Traders are betting on one of the most volatile U.S. election
seasons on record, wagering on unusually large swings in everything
from stocks to currencies. Investors are scooping up a variety of
investments that would pay out if volatility extends far beyond
Election Day itself, concerned that the outcome of the presidential
contest could remain unclear into December.
"It's a very different environment than that we've seen for any
other election," said James McCormick, a strategist at NatWest
Markets. "As an investor, you have to protect yourself because you
just don't know how this is going to swing."
Investors have grown more concerned about this election after
President Trump has repeatedly suggested, without offering
evidence, that mail-in ballots will result in widespread fraud
benefiting Democrats.
"We've had a lot of comments from President Trump last week
indicating that he may not want to hand over power smoothly," said
Jane Foley, head of foreign-exchange strategy at Rabobank. "You're
in an environment where you've had physical Black Lives Matter
protests and a rise in unemployment. That's more likely to be a
tinderbox for social unrest."
Shares in Devon energy rose more than 11% in off-hours trading
after The Wall Street Journal reported and the company later
confirmed a merger with WPX Energy. The move could help the energy
companies weather a prolonged industry slump. WPX's stock also
climbed more than 12% ahead of the opening bell.
Overseas, the pan-continental Stoxx Europe 600 rose 2.2%. A
combination of national governments introducing new fiscal measures
to support economies across the region and signs that fresh
restrictions are only having a minimal impact on economic activity
is offering some relief, investors said.
"We have had this case surge, and it has taken away one of the
positive arguments for Europe from the summer," Mr. McCormick said.
"But if you look at the mobility data, nothing's actually changed
in Europe. The restrictions are at the margin."
Among European equities, shares in HSBC Holdings advanced nearly
9% in London after Ping An Insurance of China Ltd. raised its stake
in the lender. The move came after the bank's stock hit a 25-year
low last week.
Diageo shares rose more than 7% in London after the maker of
Johnnie Walker whisky and Smirnoff vodka said its first-half
outlook had improved after a strong start to the year.
In Asia, most major benchmarks ended the day in positive
territory. Japan's Nikkei 225 Index rose 1.3%, while Hong Kong's
Hang Seng rose 1%.
China's Shanghai Composite Index was largely flat. The nation's
industrial profit grew at a slower pace in August as the export
sector faced challenges with the reopening of overseas factories.
The country's industrial companies reported a 19.1% increase in
profit in August from a year earlier, edging down from July's
19.6%, the National Bureau of Statistics said Sunday.
The British pound rose 1% against the U.S. dollar and 0.7%
against the euro. Analysts said the currency had been lifted by
fresh hopes of a compromise in trade talks with the European Union
as the two sides began a new round of discussions Monday.
Shares in Uber rose 4% ahead of the opening bell in New York
after the ride-hailing company won an appeal over the revocation of
its operating license in London, ending for now a yearslong tussle
with regulators in one of its biggest global markets.
In bond markets, the yield on the benchmark 10-year Treasury
ticked up to 0.665%. from 0.659% Friday.
Brent crude, the international energy benchmark, ticked up 0.8%
to $42.76 a barrel.
Write to Anna Isaac at anna.isaac@wsj.com
(END) Dow Jones Newswires
September 28, 2020 09:22 ET (13:22 GMT)
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