Stock Futures Signal Muted End to Choppy Week on Wall Street
October 16 2020 - 6:12AM
Dow Jones News
By Joe Wallace
U.S. stock futures wobbled Friday ahead of data on retail sales
and industrial production, signaling a potentially muted end to a
volatile week on Wall Street.
Futures tied to the S&P 500 wavered between gains and losses
after the broad stocks gauge fell for a third straight day
Thursday. The benchmark is on track to eke out its most tepid
one-week advance for this year. Contracts for the technology-heavy
Nasdaq-100 edged up 0.2%.
Stocks have been buffeted in recent days by spikes in
coronavirus infection levels and uncertainty around the likelihood
of a second batch of economic stimulus being delivered before
Election Day. Investors say a new round of relief is needed to keep
the U.S. economy in recovery mode.
Rising Covid-19 cases point to an autumn surge in infection that
may prompt local authorities to renew restrictions, dealing a blow
to the halting economic recovery.
"There are some pretty significant concerns that we're going to
see a ramp-up in infections in the U.S.," said Ronald Temple, head
of U.S. equity at Lazard Asset Management. "I am worried that could
be a headwind between now and year-end."
The burst of infection is likely to make consumers more cautious
about travel, or going to restaurants, cinemas and stores. Many
investors are overly bullish about the chances of a vaccine being
developed, Mr. Temple added.
White House and Democratic negotiators agreed Thursday to
include a national coronavirus-testing strategy in relief
legislation, potentially removing a key Democratic concern with the
administration's proposals. President Trump called on Treasury
Secretary Steven Mnuchin to accept an aid package approaching $2
trillion. Many Republican lawmakers are wary of approving another
bill of that size, but Mr. Trump on Thursday insisted Senate
Republicans will back him despite their current misgivings.
"They might get something together, but it's really surprising
that it hasn't happened yet," said Jonas Goltermann, senior markets
economist at Capital Economics.
Another factor weighing on stocks this week is concern about how
quickly drugmakers will be able to come to market with an
immunization shot.
"There's been bad news about vaccines," Mr. Goltermann said,
pointing to the pause in trials of Johnson & Johnson's Covid-19
shot. "That's arguably even more important than the fiscal
stimulus. A vaccine would be a game-changer."
More than half a dozen states reported record numbers of new
coronavirus cases Thursday, pushing the U.S.'s single-day total
above 60,000 for the first time in over two months. Midwestern
states including Ohio, Wisconsin and Michigan were particularly
hard hit.
Investors are also awaiting the latest data on U.S. retail
sales, due to be published at 8:30 a.m. ET. Sales likely rose for a
fifth month in a row in September as consumers prepared for further
months of working and studying from home by spending on appliances
and vehicles.
Consumer spending may falter over the winter if Washington
doesn't deliver a new round of stimulus, according to Mr. Temple.
"The longer this persists without that extra unemployment benefit
the more likely we are to see evictions, mortgage delinquencies and
other kinds of credit defaults," he said. "You're going to see a
slow grinding deceleration in consumption activity."
Other data indicate the economy is already losing momentum. New
applications for unemployment benefits, a proxy for layoffs, last
week rose to the highest level since late August.
Earnings season is rolling on, with State Street, Bank of New
York Mellon and oilfield-services company Schlumberger due to file
quarterly results before the bell in New York. J.B Hunt Transport
Services is set to report earnings after the close of trading.
Traders will also parse data on U.S. industrial production, due
from the Federal Reserve at 9:15 a.m. ET, and a preliminary reading
at 10 a.m. of the Michigan Consumer Sentiment Index for this month.
Economists expect industrial output to have continued its recovery
in September, though at a slower pace than earlier in the
summer.
Yields on 10-year Treasury notes edged down to 0.724%, from
0.730% Thursday. The WSJ Dollar Index, which tracks the U.S.
currency against a basket of others, ticked down 0.1%.
In overseas markets, European stocks recouped some recent
losses, pushing the Stoxx Europe 600 up 0.7%. Asian markets were
mixed by the close of trading, with China's Shanghai Composite
Index ticking up 0.1% and Japan's Nikkei 225 losing 0.4%.
U.S. crude-oil futures fell 0.8% to $40.64 a barrel ahead of
weekly data on the number of active oil rigs from Baker Hughes.
Write to Joe Wallace at Joe.Wallace@wsj.com
(END) Dow Jones Newswires
October 16, 2020 05:57 ET (09:57 GMT)
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