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Equity futures held steady during overnight trading Sunday, as investors assessed the outlook for more stimulus for Covid-19.
Futures on the Dow Jones Industrial Average fell only 15 points. S&P 500 futures and Nasdaq 100 had both changed little.
The stock market is coming off a solid week starting 2021, as investors looked past a violent siege of the Capitol and focused on the prospect of additional fiscal stimulus after a democratic rise of Congress. The S&P 500 climbed straight to a record high for four days, up 1.8% last week. The Dow and the tech-heavy Nasdaq Composite gained 1.6% and 2.4% respectively in the past week and also hit record highs.
“Progress is based on three main pillars: strong corporate earnings, massive stimulus packages and vaccine optimism,” Vital Knowledge’s Adam Crisafulli said in a note on Sunday. “Incentive expectations are getting higher – Biden’s plan may be worth several trillion dollars on paper, but what is actually assumed will likely be much smaller.”
President-elect Joe Biden on Friday promised a massive roll-out of economic stimulus measures, which he said will be “in the trillions of dollars.” More details will follow in a formal announcement on Thursday, six days before he will take office.
The need for further stimulus was underscored by an unexpected job loss in December. The Labor Department reported Friday that nonfarm payrolls fell 140,000 as new lockdown restrictions hammered virus-prone industries, marking the first monthly drop since April.
The political turmoil should continue this week and it remains to be seen when and if the markets will be affected. Democrats with the backing of some Republicans are on track to launch impeachment proceedings against President Donald Trump in the House of Representatives this week for instigating the Mafia attack. The House Rules Committee is expected to speed up the impeachment process without hearings or votes from the committee.
For now, the market appears to be looking past it as Congress was able to successfully confirm Biden’s election victory and the Democrats now in the Senate majority are likely to pursue another major boost. As these events begin to delay or derail those stimulation plans, traders may start paying more attention.
Some on Wall Street are seeing a downturn for the market, especially after a surprisingly strong 2020. The S&P 500 gained 16.3% last year.
“After being bullish for several months, we are certainly becoming more cautious in the stock market at these levels,” Matt Maley, Miller Tabak’s chief market strategist, said in a note on Sunday. “We think the vast majority of the rally is over from the March lows … and a correction will begin sometime in the first quarter of this year.”
Last week, the benchmark 10-year Treasury yield broke above 1% for the first time since the pandemic unrest in March.
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