U.S. stock futures fell slightly in overnight trading and pointed to modest losses at the open on Wednesday, as investors juggled optimism about the reopening of the economy and a possible coronavirus vaccine as well as concerns about U.S.-China tensions.
Recent hopes for a return to normal consumer habits has pushed the Dow Jones Industrial Average and S&P 500 to briefly touch key market levels for the first time since early March; however, a escalation of U.S.-Chinese tensions has capped gains.
Dow futures fell about 50 points. The S&P 500 and Nasdaq were also lower, with losses of 7 points and 22 points, respectively.
Stocks started the holiday-shortened week off strong. On Tuesday, the Dow Jones Industrial Average climbed more than 500 points, or 2.2%. The 30-stock average briefly traded above 25,000, a level not seen since early March.
A report from Bloomberg News that said the Trump Administration is weighing sanctions on Chinese firms and officials over the situation in Hong Kong pushed stocks off their highs in the final hour of trading. President Trump said Tuesday afternoon he would make an announcement about the administration’s response to China’s actions by the end of this week.
The S&P 500 climbed 1.2%, briefly breaching the 3,000 level for the first time since March 5. Many Wall Street analysts believe breaking above this level is a bullish long-term trend. The Nasdaq Composite rose 0.2%.
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Nine of eleven S&P 500 sectors were positive in Tuesday’s session, led by banks, which are getting a boost the economy reopening. Citigroup rose more than 9% and JPMorgan gained 7% after CEO Jamie Dimon said the bank is “very valuable” at current prices.
“For the first time in this crisis, we are being bombarded by good news,” Jim Paulsen, chief investment strategist at the Leuthold Group told CNBC. “The S&P 500 finally breaks above its 200-day moving average (3000)” and "more new vaccine drugs look promising.”
Biotech company Novavax said Monday it started the first human study of its experimental coronavirus vaccine.
“Certainly the market has been making a V-pattern upward and there’s been a tremendous amount of skepticism around that but we are just starting now to see some evidence in the data turning,” said Michael Darda, MKM Partners chief market strategist and chief economist. “Some better than expected housing numbers. As reopening gets underway, virtually all states now we are starting to see activity bounce off of very low levels.”
Data release Tuesday showed new home sales in April topped estimates. Sales of new U.S. single-family homes increased by 623,000 last month, beating estimates of 490,000, according to Dow Jones. A measure of consumer confidence jumped to 86.6 this month from 85.7 in April, according to the Conference Board. Economists polled by Dow Jones expected consumer confidence of 82.3 in May.
Stocks’ recent strength — last week the Dow has its best week since early April — still leaves the Dow down more than 12% in 2020. The S&P 500 is off 7.4% for the year and the tech-heavy Nasdaq is up more than 4%.
A reescalation of tensions between the U.S. and China could certainly dent stocks’ recent progress. White House National Security Advisor Robert O’Brien said Sunday the White House will likely impose sanctions on China if Beijing implements national security law that would give it greater control over autonomous Hong Kong.
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