By Chitra Somayaji
U.S. stock futures edged higher Wednesday as investors weighed the risks to the economy from rising coronavirus-infection levels against the prospect of vaccines that could halt the pandemic.
Futures tied to the S&P 500 index ticked up 0.2%, while contracts linked to the Dow Jones Industrial Average and the Nasdaq-100 indexes also posted muted gains.
Optimism that vaccines will curtail infection levels and propel the economic rebound next year has bolstered investors' risk appetite this week.
On the flip side, a litany of concerns including rising Covid-19 cases that are prompting new restrictions on social and business activity, and the halting pace of economic recovery, are weighing on sentiment. Hopes for a large fiscal stimulus package are also ebbing, investors said.
"When you look at the U.S., the prospect for either near-term fiscal policy or sizable medium-term fiscal policy is much reduced," said James McCormick, a strategist at NatWest Markets. The economic recovery also seems to be slowing during the fourth quarter, he said. "And most importantly, you've got a new surge in coronavirus cases that is starting to trigger some new state-by-state lockdowns."
Federal Reserve Chairman Jerome Powell on Tuesday also cautioned that the economy faces significant challenges and uncertainty because of the increased spread of the coronavirus. He also said it was too soon to say how a potential vaccine would change the outlook, with the possibility of widespread vaccination still many months away.
The number of newly reported Covid-19 cases rose again on Tuesday, and hospitalizations hit another record in the U.S. With cases on the rise, more states are implementing new restrictions on people's activity. Ohio imposed on Tuesday a statewide curfew, requiring residents to stay at home from 10 p.m. to 5 a.m.
In bond markets, the yield on 10-year Treasurys ticked down to 0.857%, from 0.872% on Tuesday. That was its lowest level in almost two weeks.
"The bond market recognizes that the U.S. economy, which has had a reasonable recovery, now looks a bit tired," said Mr. McCormick. "What you're seeing over the last couple of days is genuine disappointment starting to seep into bond markets."
Oil prices edged higher. Brent crude, the international benchmark, gained almost 1% to $44.16 a barrel.
The quarterly earnings season is still under way, giving investors a view into the health of major American businesses. Retailer Target is scheduled to report its results around 6:30 a.m. ET. After markets close, Nvidia and L Brands will disclose their earnings.
Data on new-home construction will be available at 8:30 a.m., offering fresh insights into the strength of the American housing market. That has been one of the few bright spots in the U.S. economy this year.
Overseas, the pan-continental Stoxx Europe 600 ticked up less than 0.2%.
In Asia, most major equity benchmarks ended the day higher. Japan's Nikkei 225 index dropped 1.1% by the close of trading after local authorities said there had been a jump in coronavirus cases.
--Mischa Frankl-Duval contributed to this article.
(END) Dow Jones Newswires
11-18-20 0546ET
