Traders work on the floor of the New York Stock Exchange.
Stock futures slumped in overnight trade on Sunday as investors weighed expectations for further stimulus of relief from Covid-19.
Futures on the Dow Jones Industrial Average fell 60 points. S&P 500 futures traded 0.2% lower, and the Nasdaq 100 fell 0.1%.
The stock market is approaching a strong week to start 2021 as investors looked beyond a violent siege of the Capitol building and focused on the possibility of additional fiscal stimulus after the Democrats sweep Congress. The S&P 500 Index rose for four consecutive days to a record high, gaining 1.8% last week. The heavyweight Dow Jones and Nasdaq composite index rose 1.6% and 2.4% the previous week, respectively, and also reached all-time highs.
“The progress is built on three main pillars: strong corporate profits, massive stimulus, and optimism about vaccines,” Adam Crisafoli of Vital Knowledge said in a note on Sunday. “The stimulus expectations are on the rise – the Biden plan may be worth several trillions of dollars on paper, but what is actually passed on will likely be much smaller.”
President-elect Joe Biden on Friday pledged a massive release of economic stimulus, which he said would be “in the trillions of dollars.” He will follow more details in an official announcement on Thursday, six days before he takes office.
The need for more stimulus was emphasized by an unexpected job loss in December. The Labor Department reported on Friday That non-farm payrolls fell by 140,000 as new lockdown restrictions imposed on virus-sensitive industries, the first monthly decline since April.
The political turmoil should continue this week and it remains to be seen when or if the markets will be affected. Democrats, with the support of some Republicans, are moving towards the start of impeachment measures in the House of Representatives against President Donald Trump as soon as this week for his incitement of a mob attack. The House Rules Committee is expected to speed up impeachment procedures without hearings or committee votes.
For now, the market appears to be looking beyond because Congress was able to successfully confirm Biden’s election victory, and the Democrats now in the Senate majority are likely to seek another major incentive. If these events start to delay or derail these stimulus plans, then traders may start paying more attention.
Some on Wall Street see a dip on the horizon for the market, especially after the surprisingly strong year of 2020. The S&P 500 is up 16.3% last year.
“After we have been optimistic for several months, we have definitely become more cautious in the stock market at these levels,” Matt Malle, chief market strategist at Miller Tabak, said in a note on Sunday. “We believe that the vast majority of the rally from the March lows is behind us … and that the correction is likely to begin at some point in the first quarter of this year.”
Last week, the benchmark 10-year Treasury yield exceeded 1% for the first time since the disruptions caused by the pandemic in March.
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