U.S. stocks open slightly lower but aim for another round of records as 2020 winds down

by Warrior2

Stocks opened modestly higher Wednesday, but Wall Street benchmarks look likely to take a run at another round of records in the penultimate trading session of 2020.

What are major benchmarks doing?
  • The Dow Jones Industrial Average DJIA, 0.46% rose 108 points, or 0.4%, to open near 30,443.
  • The S&P 500 SPX, 0.37% was up 15 points, or 0.4%, near 3,742.
  • The Nasdaq Composite COMP, 0.37% gained 68 points, or 0.5%, to trade near 12,918.

Stocks ended slightly lower Tuesday after pushing to all-time intraday highs in early action, a day after the Dow, S&P 500, and Nasdaq Composite closed at records.

What’s driving the market?

Thin end-of-year trading conditions could make for exaggerated market moves and make it more difficult than usual to discern whether action is being driven by events or money flows, analysts said.

“To me this just seems like a bit of a consolidation,” said Will Geisdorf, senior research analyst with Sarasota, Florida-based Allegiant Private Advisors.  “We’ll drift through the holidays with light volume and maybe in the first-second week of January we’ll get some catalysts.”

“The reflation trade has gone a little too far, too fast,” he added. “The early stages of the vaccine roll-out have been underwhelming and people are reconsidering how fast the economy is going to bounce back. I think we’re waiting for things to get a little more organized and the vaccine rollout to spread, and people will get back to the reflation trade.”

The market’s drift lower on Tuesday was partly blamed on a lack of action by the Senate on bigger direct payments to households after the Democratic-controlled House on Monday passed legislation that would boost the size of payments from $600 to $2,000 after the $900 billion coronavirus financially aid package signed into law by President Donald Trump on Sunday.

Democrats have moved to back the call for bigger payments by President Donald Trump, but the Senate adjourned Tuesday without taking any action on the House bill to increase the size of the payments, with Majority Leader Mitch McConnell, R-Ky., hinting that he would like to tie the debate to other issues.

“If the Senate votes in favor of the plan, then equities could drift higher, while the opposite may be true in case of a rejection,” said Charalambos Pissouros, senior market analyst at JFD Group, in a note.

But any retreat sparked by the rejection of larger checks would be unlikely to last for long and could prove to be a buying opportunity, Pissouros said.

“We stick to our guns that the COVID vaccinations, the fiscal stimulus in the U.S., the Brexit accord, and a Biden presidency, may continue benefiting risk assets, while safe havens could stay under selling interest,” Pissouros said.

What the News Means for You and Your Money

Get the tools you need to succeed in the market, with real-time market data, news, and analysis from MarketWatch — one of the most reputable brands for personal finance, business, and market news. Become a MarketWatch subscriber today.

U.S. Treasury Secretary Steve Mnuchin said late Tuesday that direct deposit payments of $600 to many lower income Americans have begun and paper checks will start being mailed Wednesday.

Meanwhile, the U.S. counted at least 200,902 new COVID-19 cases on Tuesday, and at least 3,626 people died, according to a New York Times tracker. The new, more contagious COVID-19 variant recently discovered in the U.K. was detected in the U.S. for the first time, in Colorado, on Tuesday.

Also on the COVID front, AstraZeneca PLC AZN, -0.23% AZN, +1.28% on Wednesday said the coronavirus vaccine it has developed with the University of Oxford has been approved by the U.K. government.

Separately, the Census Bureau said Wednesday that the U.S. trade deficit in goods climbed to $84.8 billion in November from $80.4 billion the month before. Wholesale inventories ticked down 0.1% in November, rather than increasing as forecast, a good sign for economic demand.

The U.S. economic calendar also features the Chicago-area purchasing managers index December at 9:45 a.m. ET and a report on November pending home sales is set for release at 10 a.m. ET

Which companies are in focus?
How are other markets trading?
  • In Asia, the Shanghai Composite SHCOMP, +1.05% gained 1.1%, while Hong Kong’s Hang Seng Index jumped 2.2% and Japan’s Nikkei 225 Index closed 0.5% lower.
  • London’s FTSE 100 UKX, -0.40% reversed course to trade 0.4% lower. The pan-European Stoxx 600 Europe index SXXP, -0.08%  slipped 0.1%.
  • The yield on the 10-year Treasury note TMUBMUSD10Y, 0.935%   was virtually unchanged at 0.941%. Yields and debt prices move in opposite directions.
  • Oil futures moved lower, despite a fall in U.S. inventories. The U.S. benchmark West Texas Intermediate crude for February delivery CLG21, 0.60%  slipped 17 cents, or 0.4%, to $47.83 a barrel.
  • Gold futures GC00, 0.37%  edged higher, up 0.3% to $1,888.10 as the dollar slipped.
  • The U.S. dollar DXY, -0.33% was 0.3% lower compared to a basket of trading partners.

You may also like

Leave a Comment