Futures Show Stocks on Track for Tepid Weekly Loss

11/20/2020 | 05:24am

By Joe Wallace

U.S. stock futures slipped Friday, putting Wall Street on track to end a choppy week with muted losses.

Futures tied to the S&P 500 edged down 0.4%, suggesting the broad market gauge may erase Thursday's tepid gains after the opening bell. Nasdaq-100 contracts wavered between gains and losses, while Dow Jones Industrial Average futures fell 0.5%.

Stocks have turned choppy in recent days, after optimism about the development of effective coronavirus vaccines propelled the Dow to a record high at the start of the week. Surging coronavirus infections, signs that the economy has lost momentum, and the Treasury's decision to allow several emergency Federal Reserve programs to expire have since removed some of that cheer.

"We're looking at short-term negatives," said Paul Jackson, head of asset allocation research at Invesco. "The markets are busy trying to balance that with the longer-term good news that is coming from vaccines."

Stocks are likely to wobble in the coming months before rallying in 2021 as the rollout of vaccines allows swaths of the world economy to reopen, Mr. Jackson added.

The Fed signaled disappointment after Treasury Secretary Steven Mnuchin on Thursday said several novel programs that have backed corporate credit and municipal-borrowing markets would end on Dec. 31. Mr. Mnuchin asked the Fed to return more than $70 billion in funds that had already been transferred to the central bank to cover loan losses.

Investors and analysts said it was true that credit markets, which nearly froze in March as the pandemic triggered a financial shock, have been rehabilitated. Still, the decision raises uncertainty about the degree of support that will be in place for the economy if states impose further restrictions to quell the wave of infections.

"For smaller businesses faced with potential restrictions, this is a severe blow," said Sebastien Galy, senior macro strategist at Nordea Asset Management. "It does add uncertainty in a lockdown and sends a jitter through credit."

Every indicator of the virus's spread across the U.S. continued to accelerate. The country logged its highest-ever number of newly reported Covid-19 infections in a day Thursday -- 187,833, exceeding the previous record by more than 10,000 -- and reported record-high hospitalizations for the 10th day in a row. California Gov. Gavin Newsom issued a new stay-at-home order that will require the most of residents to stay at home and businesses to close between 10 p.m. and 5 a.m.

"There is a risk, though, we will have some degree of profit taking," said Jane Foley, head of foreign-exchange strategy at Rabobank. "It is quite likely that in the next two quarters, economic data is going to print some nasty numbers."

Before the bell in New York, shares in Gilead Sciences fell 2.3% after the World Health Organization recommended against the use of antiviral drug remdesivir for Covid-19.

In bonds, the yield on 10-year U.S. Treasury notes slipped to 0.839%, from 0.854% Thursday. The decline put yields on course for their third fall in four trading days. The WSJ Dollar Index, which tracks the U.S. currency against a basket of others, was flat.

Overseas, basic-resource, industrial and oil-and-gas stocks led European markets higher. The pan-continental Stoxx Europe 600 edged up 0.4%.

The Shanghai Composite Index gained 0.4% by the close, and Japan's Nikkei 225 ticked down 0.4%.

U.S. crude-oil futures edged up 0.2% to $41.97 a barrel, extending weekly gains ahead of the Baker Hughes survey of U.S. drilling activity.

Write to Joe Wallace at Joe.Wallace@wsj.com

(END) Dow Jones Newswires

11-20-20 0523ET

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