August 10, 2022

Dow industrials aim to get off the week to a solid start, futures jump nearly 400 points


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U.S. stock indexes on Monday looked poised to advance sharply to start the week as investors brace for a period in which the race for the White House and the state of the economy may come into greater clarity.

Futures for the Dow Jones Industrial Average (YMZ0)rose 374 points, or 1.4%, to reach 27,417, those for the S&P 500 index (ESZ0) advanced 47 points, or 1.5%, to 3,335, while Nasdaq-100 futures (NQZ0) climbed 2% to reach 11,360.25, a rise of 223.75 points.

Last week, the Dow (DJIA) finished down 1.8%, the S&P 500 index (SPX) booked a 0.6% decline, with both marking their longest losing streaks since August of 2019. The Nasdaq Composite Index (COMP) however, gained 1.1% for the week, ending its three-week losing skid.

Wall Street is aiming to get off the week to a positive start with some investors attributing the apparent trend higher on fresh talk of a coronavirus stimulus package, a hoped-for development that has been viewed as a key driver of the market’s next bullish phase.

House Speaker Nancy Pelosi over the weekend said there’s a chance that a deal on new aid can be achieved.

“I trust Secretary [Steven] Mnuchin to represent something that can reach a solution, and I believe we come to an agreement,” Pelosi said on CNN’s “State of the Union.” Reports indicated that an aid package could be voted on at the beginning of next month, with Pelosi advocated for a $2.2 trillion deal to help out-of-work Americans and businesses hard hit by the COVID-19 pandemic.

Meanwhile, investors were bracing for the first televised presidential debates on Tuesday between President Donald Trump and Democratic challenger Joe Biden, which could help to influence the trajectory of the 2020 race for the White House, with Biden leading by 7 percentage points, 49.8 to 42.8, in an average of national polls by RealClearPolitics.

Wall Street has largely viewed a Trump second term as a continuation of business-friendly policies, while Biden’s has been read as a higher tax regime for American corporations and tighter regulations.

A number of deals, including so-called merger of equals between Devon Energy (DVN) and WPX Energy (WPX) was providing some additional optimism for Wall Street.

Investors last week have grown increasingly anxious about the election, with Trump last week implying that he wouldn’t easily hand over power to Biden, citing concerns about mail-in ballots, without providing specific evidence.

Separately, rising tensions between China and the U.S., however, continue to simmer, with the fight over TikTok raging. The Trump administration’s ban of the popular social-media platform was overturned by a federal judge over the weekend. The U.S. Commerce Department plans to implement a full ban of the China-based platform on Nov. 12 if a deal for at least the U.S. arm of the operation isn’t consummated.

The unusual deal, given it is being seemingly dictated by governments, has been viewed as a proxy for the state of Sino-American relations.

In public health news, the U.S. reported nearly 37,000 new cases of the novel strain of coronavirus that causes COVID-19, with the world-wide tally approaching one million.

Rising cases of the deadly infection last week, particularly in Europe, were at least partially blamed for the weakness, along with elections worries and a lack stimulus, in the equity market.

“ Sentiment has taken a significant hit as a result of surging Covid cases in Europe and the risk of further restrictions, even lockdowns,” wrote Craig Erlam, senior market analyst at Oanda, in a research report. “That risk hasn’t gone away which makes me cautious about these spurts of optimism.”

Investors also will be looking ahead to the key piece of data this week, the update on the monthly U.S. jobs report due on Friday.

“That optimism will certainly be put to the test this week, with the first US Presidential debate taking place Tuesday evening, jobs report coming Friday,” Erlam wrote.

In other news, investors may be poring over a New York Times report that alleges, citing two decades of tax documents the paper said it has obtained, that Trump paid just $750 in federal taxes in 2016 and 2017, and nothing in the past 10 of 15 years.

The 10-year Treasury note yield (BX:TMUBMUSD10Y) was up 0.9 basis point to 0.668%. Bond prices move inversely to yields.

U.S. benchmark crude futures for November delivery (CRUD) was trading 10 cents, or 0.3%, higher at $40.35 a barrel on the New York Mercantile Exchange. Gold futures were up marginally at $1,867.30 an ounce.

In global equities, the Stoxx Europe 600 index (XX:SXXP) was up 2.2%. Meanwhile in Asia, Japan’s Nikkei (JP:NIK) gained 1.3% and Hong Kong’s Hang Seng Index (HK:HSI) rose 1%.

The ICE U.S. Dollar index, a gauge of the greenback’s strength, made a sharp swing lower on Monday. The index was trading down 0.5%.

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