U.S. Stock Futures Wobble on Stimulus Hopes, Earnings
October 21 2020 - 8:53AM
Dow Jones News
By Will Horner
U.S. stock futures drifted lower Wednesday as investors assessed
prospects for a fresh stimulus bill and the health of major
American businesses for cues on the economic outlook.
Futures tied to the S&P 500 wavered between gains and
losses, suggesting the broad index could face another day of choppy
trading. The S&P 500 added 0.5% Tuesday on optimism that
Congress would reach an agreement on a spending package.
Treasury yields extended their climb, with the yield on the
10-year note reaching its highest level since June at 0.812%, from
0.796% Tuesday.
Democratic negotiators and the White House said they would press
ahead with talks on the next coronavirus-relief package, setting
aside a Tuesday deadline proposed by House Speaker Nancy Pelosi to
hammer out the accord. Mrs. Pelosi signaled there was progress
after her conversation with Treasury Secretary Steven Mnuchin.
The two sides didn't decisively establish whether a deal will be
possible before Election Day, though White House chief of staff
Mark Meadows said Mrs. Pelosi and the administration are trying to
secure an agreement before the weekend. Any deal is likely to face
deep opposition from Senate Republicans, especially if the proposed
spending package approaches $2 trillion.
"What we are seeing at the moment is the market trading on these
headlines, but to us, a pre-election stimulus deal seems unlikely,"
said Seema Shah, chief strategist at Principal Global Investors.
"We can hear as much as we want from Pelosi and Mnuchin about
progressing talks, but some senators have said simply that they
won't support any package."
The number of daily coronavirus infections reported in the U.S.
grew for a third straight day, with an indicator suggesting cases
have been rising for more than two weeks. Hospitalizations continue
to rise as well, triggering concern among investors that local
authorities may need to step up lockdown measures, dealing a blow
to the economic recovery.
"It just seems like we are in a very fragile period for markets,
with people on a bit of a knife edge with what's happening with
Covid and in the approach to the U.S. election," said Altaf Kassam,
head of investment strategy and research for Europe, the Middle
East and Africa at State Street Global Advisors. "All these
back-and-forths over the stimulus deal don't help, though. It's
more noise than signal, and markets are getting pushed around by
it."
Investors are also parsing third-quarter earnings reports to
gauge how businesses are weathering the economic downturn. Verizon
Communications is set to release figures at 7:30 a.m. ET. After
markets close, Tesla, Chipotle Mexican Grill, and Whirlpool are
slated to release their earnings reports.
Snap shares jumped 22% in off-hours trading after its revenue
grew by more than half, significantly exceeding analysts'
expectations. Shares of other social-media companies also rose
premarket. Twitter was up 4.6%, Pinterest rose 7.8% and Facebook
gained 2.7%.
Netflix shares fell 5.4% in off-hours trading after the company
said subscriber growth slowed in the third quarter, highlighting
the fresh challenges from competitors ramping up their own
streaming services.
Swedish telecommunications company Ericsson saw its New
York-listed shares rise 8.3% premarket after it reported
third-quarter profits that beat analysts' views.
Markets have been jittery in the weeks ahead of the Nov. 3
elections, with many investors wary of taking big bets even though
opinion polls show that former Vice President Joe Biden and the
Democrats may win the White House and the Senate.
"The clearest risk is the contested election, and if anything, I
think it is an underestimated risk at the moment," Ms. Shah said.
"If you are looking at how to allocate in the run-up to the
election, the best thing to do is to look away: forget the noise,
trade off fundamentals."
After the surprise of the 2016 election, many investors were
choosing not to make strong calls ahead of the vote and opting for
sectors that were likely to be a safe bet regardless of the
outcome, said Kiran Ganesh, global head of investment
communications at UBS Global Wealth Management.
"There is little rational reason to take a strong position on
one of these one-off events, events that we have learned in recent
years can take you by surprise," he said. "Keep politics out of the
portfolio."
Overseas, the pan-continental Stoxx Europe 600 fell 1%.
In Asia, markets were buoyed by signs of progress in the
stimulus talks. Japan's Nikkei 225 index rose 0.3% by the close of
trading, and the Hang Seng Index climbed 0.8%.
In commodity markets, oil prices edged lower. Brent crude, the
international benchmark, dropped 1.8% to $42.40 a barrel. Gold
ticked 0.2% higher.
Write to Will Horner at William.Horner@wsj.com
(END) Dow Jones Newswires
October 21, 2020 08:38 ET (12:38 GMT)
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