By Anna Isaac
U.S. stock futures edged down Tuesday, ahead of Federal Reserve Chairman Jerome Powell's scheduled talk about the economic outlook and data on the trade deficit.
Futures tied to the S&P 500 edged down 0.2%, suggesting that the gauge may post a muted decline after the New York opening bell. Contracts tied to the Nasdaq-100 ticked down 0.4%. Both indexes surged higher Monday, but remain off their highs for the year.
Data due out at 8.30 a.m. ET is expected to show that the U.S. trade deficit widened in August as Americans' appetite for foreign goods outpaced demand from overseas.
Investors will also parse Powell's language for any fresh cues on the state of the economy when he addresses the National Association for Business Economics annual meeting at 10:40 a.m. ET. Mr. Powell in recent weeks has said swift government intervention helped support the economy during the pandemic, but more fiscal support is likely to be needed.
Stocks appeared to be taking a pause after Monday's strong rally. Investors are trying to assess the implications of both President Trump's illness and of the infection spreading among U.S. senators and top White House staff.
Early signs that the election results could favor former Vice President Joe Biden and the Democrats, as well as fresh restrictions being imposed in some places because of new waves of coronavirus infections, are also factors being taken into account.
"People are waiting for the vote to pass, and expect volatility to increase," said Seema Shah, chief strategist at Principal Global Investors. "This is not the right time to be making rash decisions about your positioning."
Fresh polls showing that Mr. Biden is pulling ahead of Mr. Trump and may secure a decisive victory in the November election is also helping calm markets, though the expected volatility remains high going up to Election Day. Investors had grown increasingly concerned in recent weeks about a narrow win for one candidate or the other, which would escalate the risk of legal disputes and lead to a period of uncertainty in the days after the election.
"A month or two ago, the market showed a preference for a Trump victory, and now the preference is for a Biden comprehensive win," said Edward Park, chief investment officer of Brooks Macdonald. "The reason that shifted is around expectations of an increasingly contentious vote, and the talks around stimulus."
A possible electoral victory for the Democrats is fueling speculation among investors that Congress will approve a large fiscal-spending package after a new government is in place, Mr. Park and others said.
"A clean sweep from the Democrats means the $3.5 trillion stimulus would be more likely to pass early next year," said Peter Garnry, head of equity strategy at Saxo Bank. "That would mean equities would likely swing back into rally mode."
Mr. Trump left the hospital with a cautious prognosis Monday after three days of treatment for Covid-19. His diagnosis created fresh uncertainty for his presidential campaign, and has also complicated plans for his Supreme Court nominee. Senate Majority Leader Mitch McConnell canceled scheduled votes after Several GOP senators tested positive, but he has said confirmation hearings for Judge Amy Coney Barrett are on track to begin on Oct. 12.
In bond markets, the yield on the benchmark 10-year Treasury ticked higher to 0.768%, from 0.760% Monday. U.S. government bond yields r eached their highest close since June Monday, lifted by mounting hopes for new fiscal stimulus from lawmakers.
Overseas, the pan-continental Stoxx Europe 600 edged down 0.2%.
In Asia, stock markets posted modest gains by the close of trading. Japan's Nikkei 225 ended trading up 0.5%, while Hong Kong's Hang Seng Index climbed 0.9%. China's Shanghai Composite Index remained closed for a holiday.
In commodities, Brent crude, the international energy benchmark, rose 1% to $41.70 a barrel.
Write to Anna Isaac at anna.isaac@wsj.com
(END) Dow Jones Newswires
10-06-20 0716ET
