Stock Futures Tick up as Investors Await Stimulus Deal, Economic Data

By Mischa Frankl-Duval

U.S. stock futures edged higher Wednesday as investors awaited progress on stimulus talks, fresh guidance from the Federal Reserve and key economic data.

Futures tied to the S&P 500 ticked 0.3% higher, signaling that the broad market gauge may climb for a second day after the New York opening bell. Nasdaq-100 futures rose 0.3%.

Signs of progress toward a fresh fiscal-stimulus package buoyed sentiment on Tuesday, allowing the S&P 500 to break a four-day losing streak. Top congressional leaders signaled they were inching closer to striking a deal after a day of meetings. Senate Majority Leader Mitch McConnell (R., Ky.) said he's optimistic, fueling bets that lawmakers will craft the new aid package before the holidays and the expiration of several key aid provisions.

Hopes for the new stimulus package have become the latest catalyst for a market rally that has sent the S&P 500 index up over 14% this year, despite the economic setback triggered by the coronavirus pandemic.

"It is just another excuse for those that missed the rally, or that are bullish anyway to buy into it," said Luca Paolini, chief strategist at Pictet Asset Management. "We know that [a deal is] coming, the signals are pretty clear," he added.

The market is choosing largely overlook immediate challenges to the economy, including rising coronavirus cases and fresh lockdown measures, investors said. The rollout of Covid-19 vaccines this month and the prospects of more shots being widely distributed next year has fueled bets that restrictions will be lifted, leading to a sharp economic rebound.

"For now, markets are attempting to look through this near-term period to the Garden of Eden that is a vaccinated population," said James Athey, investment manager at Aberdeen Standard Investments. It is possible that "at some stage, we'll have another one of those days, another few of those days, where we see a bit of concentrated weakness as markets catch up," he cautioned.

Meanwhile, investors will get fresh insights into the state of the economy when the Federal Reserve issues its latest policy statement and economic projections at about 2 p.m. ET. Money managers will be watching closely for any new guidance about how long policy makers expect to continue their current asset-purchase program, and at what pace.

"If rates are really going to stay this low for this long, if central banks are really going to support the market and are comfortable using all the firepower at their disposal, then for equity markets to be where they are isn't so crazy," said Altaf Kassam, head of investment strategy for State Street Global Advisors in Europe.

U.S. retail sales data, due out Wednesday, could show a rise for the seventh consecutive month in November. Surveys of purchasing managers, which will be released starting at 9:45 a.m. ET, are likely to point to a continued expansion in the U.S., albeit at a slower pace than in recent months.

In coming weeks, any issues curtailing the rollout of vaccines, such as unexpected side effects or logistical problems, could dampen market sentiment, Mr. Kassam cautioned.

"There will be bumps in the road," which could bring back turbulence to equity markets, he said. "But we do think the trajectory will be upward again next year," he added.

Overseas, the Stoxx Europe 600 rose 0.8%, led by shares in car makers and energy companies.

The euro rose 0.4% against the dollar to trade at $1.2209, its highest level since April 2018, after surveys of purchasing managers in France and Germany indicated that those economies held up better than expected in the early weeks of December.

In Asia, most equity benchmarks ended the day on a high note. Hong Kong's Hang Seng Index climbed almost 1%, while Japan's Nikkei closed 0.3% higher. The Shanghai Composite Index was relatively flat.

Write to Mischa Frankl-Duval at [e-mail]

(END) Dow Jones Newswires

12-16-20 0541ET