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Stock futures remained stable in the early Sunday trading, with investors assessing the prospects for further relief stimuli from Covid-19.
Futures in the Dow Jones Industrial Average fell just 20 points. The futures of the S&P 500 and the Nasdaq 100 have changed little.
The stock market is moving from a solid week to the beginning of 2021, with investors putting aside the violent encirclement of the Capitol and focusing on the prospect of further fiscal stimulus after a Democratic sweep in Congress. The S&P 500 rose for four consecutive days to a record high with a 1.8% gain last week. The high-tech Dow and Nasdaq Composite gained 1.6% and 2.4% in the previous week, respectively, also reaching historic records.
“The advance is based on three main pillars: strong corporate gains, massive stimulus and optimism with the vaccine,” said Adam Crisafulli of Vital Knowledge in a note on Sunday. “Expectations for stimulus are rising – Biden’s plan may be worth several trillion dollars on paper, but what is actually approved is likely to be much less.”
President-elect Joe Biden on Friday promised a strong economic stimulus, which he said would be “in the trillions of dollars”. More details will be released in a formal announcement on Thursday, six days before his inauguration.
The need for more stimulus was underscored by an unexpected job loss in December. The Department of Labor reported on Friday that non-farm payrolls fell by 140,000 as new blocking restrictions affected virus-sensitive industries, marking the first monthly decline since April.
Political turmoil is expected to continue this week and it remains to be seen when or if markets will be affected by it. Democrats with the support of some Republicans are moving towards starting an impeachment process in the House of Representatives against President Donald Trump already this week for inciting the crowd to attack. The House Rules Committee is expected to streamline impeachment procedures without hearings or votes from the committee.
For the time being, the market appears to be looking to the past because Congress was able to confirm Biden’s victory in the elections and Democrats now mostly in the Senate must seek another big boost. If these events start to delay or hinder these stimulus plans, traders can start paying more attention.
Some on Wall Street see a retraction on the horizon for the market, especially after a surprisingly strong 2020. The S&P 500 gained 16.3% last year.
“After being optimistic for several months, we are definitely becoming more cautious about the stock market rising at these levels,” said Matt Maley, chief market strategist at Miller Tabak, in a note on Sunday. “We believe that the vast majority of the hike since the March lows is behind us … and that a correction is likely to begin sometime in the first quarter of this year.”
Last week, the 10-year reference Treasury yield exceeded 1% for the first time since the turmoil caused by the pandemic in March.
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