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Sep 30, 2020

Futures Indicator Update: S&P 500 futures cut losses, turn slightly higher on stimulus hopes

 

Fred Imbert,Yun Li


U.S. stock futures erased earlier losses and turned higher on Wednesday amid rising hopes for further fiscal stimulus. The market headed for its first negative month since March.

Disney added to the negative sentiment after saying it would lay off 28,000 people in its theme parks division. The shares lost more than 2% in premarket trading.

Dow Jones Industrial Average futures dipped 50 points, or 0.1%. The move indicated a slight gain of about 30 points at the open. S&P 500 futures fell 0.1%. Nasdaq 100 futures lost about 0.2%.

Futures cut their losses after better-than-expected jobs data. ADP’s monthly private-sector jobs count showed growth of 749,000 in September, ahead of the 600,000 expected from a Dow Jones economist survey.

The S&P 500 is down 4.7% in September, on pace for its first monthly losses since March. The Nasdaq Composite is down 5.9% in September, while the Dow is off by 3.4%.

Traders were hoping that the start of the debate process will lead to a clear winner on Election Day and not a drawn-out electoral process that could hit the market. The vicious first debate did little to ease those concerns.

“It was a long night and there’s a lot that needs to be sorted out,” said Daniel Deming, managing director at KKM Financial. “It became pretty apparent that this thing is not going to be over on Nov. 3 and I think the market is probably not too crazy about that.”

“The short-term volatility pressures probably won’t abate anytime soon after this debate. In a sense, it’s creating even more uncertainty,” Deming said. 

President Donald Trump and Democratic nominee Joe Biden sparred on a number of issues, including their qualifications to manage the U.S. economy, the nomination of Amy Coney Barrett to the Supreme Court as well as the U.S.′ handling of the coronavirus pandemic.

Biden came into the debate with an average lead of 6.1 percentage points in recent polls, according to RealClearPolitics. The former vice president was also the favorite to win the election in betting markets heading into the debate.

“Most people come away from it thinking it was an ugly experience,” said Marc Chandler, chief market strategist at Bannockburn Global Forex. “I don’t think it changed peoples’ minds really.”

Many market strategists have cited uncertainty around the election as a key headwind for the market before year-end with each outcome bringing its own risks and benefits. Some investors have raised concerns about a potential Biden win as they fear it could lead to higher corporate taxes and tighter regulations. But at the same time, it could ease concerns about the trade war and lack of stimulus to bolster the economy in the wake of the coronavirus.

Investors are also worried about the potential the Nov. 3 result is too close to call and neither candidate concedes. That uncertainty could particularly weigh on the market.

Trump frequently claims that mail-in balloting leads to voter fraud even though experts have repeatedly said there’s no proof of that ever having been a problem in the United States. Last week the director of the FBI told a Senate committee that there’s no evidence of widespread voter fraud in the United States “whether it’s by mail or otherwise.”

Regardless, on Tuesday night Trump said, “As far as the ballots are concerned, it’s a disaster. This is going to be a fraud like you’ve never seen.”

“I think we’re going to do well because people are really happy with the job we’ve done. But we might not know for months because these ballots are going to be all over” the place,” he added. 

“Questions on election fraud were raised, which will add to concerns about a volatile post-election period if there is a close or uncertain electoral outcome,” wrote Ed Mills of Raymond James in a note entitled “Dumpster Fire Debate.”

Still, positive data regarding a potential coronavirus treatment from Regeneron Pharmaceuticals kept some of the market’s losses in check.  

Regeneron said after the close Tuesday its REGN-COV2 drug reduced viral levels and improved symptoms in non-hospitalized coronavirus patients.

“The greatest treatment benefit was in patients who had not mounted their own effective immune response, suggesting that REGN-COV2 could provide a therapeutic substitute for the naturally-occurring immune response,” Regeneron Chief Scientific Officer George D. Yancopoulos said in a statement.

The major averages snapped a three-day winning streak on Tuesday, with the Dow falling more than 100 points, or 0.5%. Those losses came amid concerns over a virus resurgence. New York City Mayor Bill De Blasio said the city’s daily positive rate of coronavirus tests is back above 3% for the first time in months.

“Coronavirus infection rates are rising in Europe and the United States as children return to school,” Terry Sandven, chief equity strategist at U.S. Bank Wealth Management, wrote in a note. “We expect the United States to continue its modest pace of economic improvement, though virus growth and a softer labor market are threats.”

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