Stock Futures Show Rally Likely to Pause This Week

11/20/2020 | 07:25am

By Joe Wallace

U.S. stock futures wavered Friday, putting Wall Street on track to end a choppy week on a muted note.

Futures tied to the S&P 500 wavered between gains and losses. Nasdaq-100 contracts edged up 0.2%, while Dow Jones Industrial Average futures were almost flat.

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.

Before the bell in New York, shares in Pfizer rose 1.5% after the pharmaceutical giant said it plans to ask U.S. health regulators on Friday to permit use of its Covid-19 vaccine. Once the company files, it would be up to the U.S. Food and Drug Administration to decide whether the two-shot vaccine works safely enough to roll out to millions of people.

Gilead Sciences fell 2.3% after the World Health Organization recommended against the use of antiviral drug remdesivir for Covid-19.

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.

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. Still, investment grade and high-yield credit indexes barely budged Friday morning.

"I think the market is betting that there will be a new Treasury Secretary [in January] and they will re-enact programs like these," said David Riley, chief investment strategist at BlueBay Asset Management. He added that it won't necessarily be simple to replace these programs because new legislation would be needed to replace the funding support from the Treasury -- and in a split Congress it might be harder to pass.

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."

In bonds, the yield on 10-year U.S. Treasury notes slipped to 0.842%, 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.

The lack of agreement in Congress on a new round of aid for the economy has continued to weigh on investor sentiment this week.

"The U.S. economy still needs stimulus to get over the hump at the moment," said Brian O'Reilly, head of market strategy at Mediolanum International Funds. Still, Mediolanum is positioning its funds for a bounceback next year in shares of industries that have suffered during the pandemic, such as financial services and materials.

Overseas, basic-resources, retail 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 gained 0.9% to $42.26 a barrel, extending weekly gains ahead of the Baker Hughes survey of U.S. drilling activity.

Write to Joe Wallace at

(END) Dow Jones Newswires

11-20-20 0724ET

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