US stock futures rallied Wednesday amid optimism that the rollout of Covid-19 vaccines and progress towards a deal on a new tax stimulus bill are promising for the economic recovery.
Futures pegged to the S&P 500 were up 0.5%, while Dow Jones Industrial Average futures were up 0.7%, suggesting that both benchmarks will rise after the opening bubble in New York. Contracts on the Nasdaq-100 Index were up 0.5%, indicating a rise for technology stocks a day after investors pulled funds from the sector, pushing broader polls down.
Stocks have been jittery for the past few days, with major indices staggering daily between losses and gains.
On Wednesday, sentiment was buoyed by signals that Democrats will try to bridge disparities on unemployment benefits and other issues as they aim to complete a $ 1.9 trillion aid package in the coming days. Mr. Biden also said the US would have enough Covid-19 vaccines for all American adults by the end of May, two months earlier than he previously said.
“The introduction of the vaccine is going extremely well against many expectations,” said Seema Shah, chief strategist at Principal Global Investors. “And at a time when it looks like the economy could recover on its own, we also have the prospect of fiscal stimulus in the background, leading many people to upgrade their growth expectations in the US.”
Optimism about the better economic outlook is especially fueling demand for stocks in companies that would benefit when the economy returns to normal, said Chris Dyer, global equities director at Eaton Vance. That includes banking and energy stocks, which are outperforming the tech sector this year.
“We can see light at the end of the pandemic tunnel,” Mr. Dyer said. “The progress that has been made in the field of vaccinations has led to confidence in the economic recovery and you have seen companies focused on that economic recovery doing well in recent months.”
The bond market has also calmed down in recent days after a surge in yields confused investors, leading to sharp declines in stocks. The yield on the 10-year US Treasury bond ticked to 1.449% on Tuesday, from 1.413% on Tuesday. That is still lower than the 1.513% achieved last month.
Top central bank officials have said the rate hike reflects optimism about the economic outlook. Federal Reserve Gov. Lael Brainard said on Tuesday that the recent bond market turmoil is on its radar screen. She indicated that the Federal Reserve will not reverse support for the economy until it is stronger, and repeated comments from other officials.
“The Fed has indicated very strongly that it wants to be patient, but also [that] the rising yields are indicative of strong growth, so that’s a good environment for equities, ”said Ms Shah.
Ahead of market opening, Lyft was up nearly 5% after the ride-sharing company announced strong February ride numbers late Tuesday. Competitor Uber also rose by 3%.
Investors await data on service sector activity from the Institute for Supply Management, due at 10 a.m.ET. The numbers are expected to show that sector-wide activity expanded for the ninth consecutive month in February.
The Fed’s beige book report, due out at 2 p.m. ET, will feature the latest collection of business anecdotes, providing insight into how companies are preparing for the reopening of the economy.
In the commodity markets, Brent oil, the international benchmark for oil, rose 1.5% to $ 63.63 a barrel. The gold price fell by 0.7%.
Abroad, the pan-continental Stoxx Europe 600 rose by 0.4%.
Most of the major Asian indices gained towards the end of trading. China’s Shanghai Composite Index was up nearly 2%, while Hong Kong’s Hang Seng was up 2.7%. The Japanese Nikkei 225 rose 0.5% and the South Korean Kospi 1.3%.
Traders will work on the floor of the New York Stock Exchange on Tuesday.
Photo:
Colin Ziemer / Associated Press
Write to Will Horner at [email protected]
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