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Stock futures traded overnight on Sunday as investors reviewed the outlook for more Covid-19 relief stimuli.
The futures market on the Dow Jones industrial average fell just 15 points. S&P 500 futures and Nasdaq 100 have changed little.
The stock market is starting a solid week to start 2021 as investors look past a violent siege of the Capitol and focus on the prospect of additional fiscal stimulus following a democratic wave of Congress. The S&P 500 climbed straight to a record high of 1.8% last week for four days. The Dow and the tech-savvy Nasdaq Composite rose 1.6% and 2.4% respectively last week, reaching all-time highs.
“The advance is based on three main pillars: strong corporate earnings, massive stimulus and vaccine optimism,” Vital Knowledge’s Adam Crisafulli said in a note on Sunday. “Stimulus expectations are rising – Biden’s plan may be worth a few billion dollars on paper, but what actually succeeds will probably be much smaller.”
President-elect Joe Biden on Friday promised a solid economic stimulus, which he said would be “in the trillions of dollars”. More details follow a formal announcement on Thursday, six days before he will take office.
The need for further stimulus is highlighted by an unexpected job loss in December. The Labor Department reported Friday that non-farm salaries have dropped by 140,000 as new restrictions on virus closures are sensitive to industries, which is the first monthly drop since April.
The political unrest must continue this week, and it remains to be seen when and if the markets will be affected by it. Democrats, with the support of some Republicans, are moving toward the start of an indictment in the House of Representatives against President Donald Trump as early as this week for inciting the mob. The House Rules Committee is expected to expedite indictments without committee hearings or votes.
The market seems to be past that, because Congress has been able to successfully confirm Biden’s victory in the election and the Democrats who are now in the Senate majority are likely to pursue another major stimulus. If these events start to slow down or derail these stimulus plans, traders may pay more attention.
Some on Wall Street see a setback on the horizon for the market, especially after a surprisingly strong 2020. The S&P 500 rose 16.3% last year.
“After being bumpy for a few months, we are definitely becoming more cautious on the stock market at these levels,” Miller Tobacco chief market strategist Matt Maley said in a note on Sunday. “We believe that the vast majority of the march from the lows in March is behind us … and that a correction is likely to begin at some point in the first quarter of this year.”
Last week, the ten-year benchmark yield by the Treasury broke above 1% for the first time since the pandemic-driven unrest in March.
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