Stock Futures Point to Extension of Record-Setting Rally
December 29 2020 - 8:05AM
Dow Jones News
By Anna Hirtenstein
U.S. stock futures ticked up Tuesday, suggesting that the major
benchmarks may extend their rally a day after closing at
records.
Futures tied to the S&P 500 and the Dow Jones Industrial
Average advanced 0.5%. Both indexes closed at all-time highs on
Monday. Contracts on the Nasdaq-100 index also climbed 0.5%,
signaling that technology stocks will also gain.
Stocks are powering higher in the final days of the year, driven
in part by the cheap money unleashed by central banks and
governments to shield the global economy from the coronavirus
pandemic. The S&P 500 index has climbed over 15% this year,
building on its 29% surge in 2019, while the Nasdaq Composite Index
has gained over 43% in 2020 alone.
"Some people are getting carried away by the race for records.
The market momentum is pushing and exceeding these record highs,"
said Carsten Brzeski, global head of macro research at ING Groep.
"They are fictive thresholds, but benchmarks can live their own
lives and this is happening now."
Trading volumes are also typically thinner in the final days of
the year with many people on vacation, which can potentially
amplify market moves.
Investor sentiment also got a boost after the House on Monday
approved a bill proposing to increase the size of stimulus checks
to $2,000, from $600. The measure now heads to the Senate where its
fate is uncertain. Senate Majority Leader Mitch McConnell (R., Ky.)
hasn't commented on whether he will take up the bill.
"Markets aren't necessarily taking the potential increase for
granted, but there is a cheerfulness about the possibility of
stepping it up. This is partly being priced in," said Mr.
Brzeski.
The WSJ Dollar Index, which tracks the U.S. currency against a
basket of others, fell 0.3% to its lowest level in over a week.
In bond markets, the yield on the benchmark 10-year Treasury
ticked up to 0.941%, from 0.932% on Monday.
Meanwhile , the coronavirus pandemic continues to rage on with
hospitalization rates in the U.S. surging to a new high on Monday.
Intensive care units are also coming under pressure.
"There is this combination of lockdowns, the virus spreading and
new strains, but investors are still emphasizing the positive news
flow over this," said Jeroen Blokland, head of multiasset at
Robeco.
In premarket trading, Snap rose over 3% after a Goldman Sachs
analyst raised the price target on the developer of the Snapchat
app.
Overseas, the pan-continental Stoxx Europe 600 added 0.9%.
In the U.K., where markets reopened Tuesday, the main FTSE 100
stocks benchmark rose over 2% as investors cheered the post-Brexit
deal struck on Christmas Eve. British and European Union officials
reached an agreement that includes a free-trade accord, bringing to
an end over four years of uncertainty.
"The Brexit deal will help risk sentiment. As investors come
back to the office for the first time since Christmas, people are
looking into the details of the deal," said James Athey, investment
manager at Aberdeen Standard Investments.
Among European equities, AstraZeneca jumped almost 4% on reports
that the pharmaceutical company's Covid-19 vaccine may be approved
by the U.K. government in coming days.
British banks were among the worst performers, with Lloyds
Banking Group slipping almost 4%, Barclays falling roughly 3% and
NatWest Group down 2.7%. It isn't entirely clear how the Brexit
deal will affect financial services.
In Asia, most major benchmarks climbed by the close of trading.
Japan's Nikkei 225 index rose 2.7%, ending the day at a 30-year
high. Hong Kong's Hang Seng Index added 1%, while the Shanghai
Composite Index edged down 0.5%.
"The momentum in Asian stocks shows that this whole
vaccine-motivated rally is getting global," Mr. Blokland said. "For
2021, we are quite bullish, we do think that the economic recovery
will recommence from [the first quarter] and the stimulus boost out
of the U.S. will help."
Write to Anna Hirtenstein at anna.hirtenstein@wsj.com
(END) Dow Jones Newswires
December 29, 2020 07:50 ET (12:50 GMT)
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