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Stock futures remained stable during trading on Sunday night as investors assessed the prospects for a higher Covid-19 easing stimulus.
Dow Jones industrial average futures fell just 15 points. The future S&P 500 and Nasdaq 100 changed little.
The stock market comes a solid week to begin in 2021, as investors watched a violent siege on the Capitol and focused on the prospect of an additional fiscal stimulus following a democratic sweep in Congress. The S&P 500 rose four days in a row to a record high of 1.8% last week. The high-tech Dow and Nasdaq Composite gained 1.6% and 2.4% the previous week, respectively, and also hit all-time highs.
“The breakthrough is based on three main pillars: strong business gains, massive incentives and vaccine optimism,” Adam Crisafulli of Vital Knowledge said in a note Sunday. “Stimulus expectations are getting higher and higher: Biden’s plan may be worth several trillion dollars on paper, but what is actually exceeded will probably be much smaller.”
President-elect Joe Biden pledged on Friday to a strong deployment of economic stimulus, which he said will “be in the trillions of dollars.” More details will follow in a formal announcement on Thursday, six days before he is scheduled to take office.
The need for new stimuli became apparent in the unexpected loss of employment in December. The Labor Department reported Friday that non-farm payrolls fell by 140,000 as new blockade restrictions attacked virus-sensitive industries, marking the first monthly drop since April.
Political turmoil is expected to continue this week and it remains to be seen when or if markets will be affected. Democrats with the support of some Republicans are on their way to initiating lawsuits in the House of Representatives against President Donald Trump as early as this week for inciting people to attack. The House Rules Committee is expected to expedite the removal procedures without hearings or committee votes.
For now, it looks like the market is looking further because Congress was able to successfully confirm Biden’s election victory and Democrats who now have a majority in the Senate are likely to pursue another major stimulus. If these events begin to delay or derail these stimulus plans, traders may begin to pay more attention.
Some on Wall Street see a setback on the market horizon, especially after a surprisingly strong 2020. The S&P 500 gained 16.3% last year.
“Having been bullish for several months, we are definitely being more cautious on the stock market at these levels,” Matt Taby, market strategist at Miller Tabak, said Sunday. “We believe the vast majority of the March lows concentration is behind us … and a correction is likely to begin sometime in the first quarter of this year.”
Last week, the 10-year benchmark Treasury yield was above 1% for the first time since the pandemic unrest in March.
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