The major U.S. index futures are pointing to a moderately higher open on Wednesday, with stocks likely to move back to the upside after turning lower over the course of the previous session.
Traders may make another attempt at window dressing going into the end of the year after profit taking set in following an early advance on Tuesday.
News that U.K. regulators have approved a coronavirus vaccine developed by AstraZeneca (AZN) and the University of Oxford for emergency use may also generate some positive sentiment.
Nonetheless, the upcoming New Year’s Day holiday on Friday is likely to keep overall trading activity relatively subdued.
Traders are also likely to keep an eye on developments in Washington, as lawmakers haggle over increasing stimulus checks to $2,000 from $600.
Senate Majority Leader Mitch McConnell, R-Ken., blocked Democratic efforts to fast-track a House approved measure to increase the size of the checks.
McConnell has instead proposed a bill that would tie the bigger stimulus checks to the repeal of a provision that protects social media platforms and the creation of an election fraud commission.
With Democrats likely to oppose the combined package, Senate Minority Leader Chuck Schumer, D-N.Y., described the move by McConnell as a “blatant attempt to deprive Americans of a $2,000 survival check.”
Political observers have suggested McConnell added the so-called “poison pill” to give cover to Georgia Senators seeking re-election in next week’s crucial run-offs.
Stocks failed to sustain an initial move to the upside and moved modestly lower over the course of the trading session on Tuesday. With the drop on the day, the major averages pulled back off Monday’s record closing highs.
The major averages ended the day in negative territory but off their lows of the session. The Dow dipped 68.30 points or 0.2 percent to 30,335.67, the Nasdaq fell 49.20 points or 0.4 percent to 12,850.22 and the S&P 500 slipped 8.32 points or 0.2 percent to 3,727.04.
Stocks initially benefited from window dressing, as some fund managers looked to further boost their portfolios going into the end of the year.
The initial advance lifted the major averages to new record intraday highs, although buying interest waned shortly after the start of trading.
Traders subsequently looked to cash in on the recent strength in the markets, leading to the pullback by the major averages.
Traders also kept an eye on the latest developments in Washington after President Donald Trump signed a coronavirus relief and government spending bill over the weekend.
Trump has called for the direct payments included in the bill to be increased to $2,000 from $600, and the House voted Monday to approve a measure increasing the size of the stimulus checks.
However, Senate Majority Leader Mitch McConnell, R-Ken., blocked an effort by Senate Minority Leader Chuck Schumer, D-N.Y., to unanimously approve the House bill.
The choppy trading seen on the day reflected light volume, as many traders remained away from their desks ahead of the New Year’s Day holiday on Friday.
Networking stocks showed a substantial move to the downside on the day, dragging the NYSE Arca Networking Index down by 1.7 percent. The index pulled back after reaching its best intraday level in almost twenty years.
Considerable weakness was also visible among biotechnology stocks, as reflected by the 1.6 percent drop by the NYSE Arca Biotechnology Index.
Within the biotech sector, shares of Arcturus Therapeutics (ARCT) moved sharply lower as analysts were disappointed by the results of a Phase 1/2 trial of its COVID-19 vaccine candidate.
Tobacco, computer hardware and oil service stocks also moved to the downside on the day, while some strength was visible among pharmaceutical stocks.
Commodity, Currency Markets
Crude oil futures are inching up $0.16 to $48.16 a barrel after rising $0.38 to $48 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,885.90, up $3 compared to the previous session’s close of $1,882.90. On Tuesday, gold edged up $2.50.
On the currency front, the U.S. dollar is trading at 103.01 yen compared to the 103.58 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.2286 compared to yesterday’s $1.2249.
Asian stocks ended mixed on Wednesday amid uncertainty about whether the U.S. Senate would approve a measure increasing the size of stimulus checks to $2,000.
Nevertheless, the start of mass COVID-19 vaccination drives in several countries and the passage of U.S. fiscal stimulus boosted hopes for a strong economic recovery next year.
Chinese shares rose amid hopes of a robust economic recovery next year, while Hong Kong shares rallied for a second day, reflecting a rebound in the tech sector.
The benchmark Shanghai Composite Index jumped 35.42 points or 1.1 percent to 3,414.45 and Hong Kong’s Hang Seng Index surged up 578.62 points or 2.2 percent to 27,147.11.
In Hong Kong, shares of Alibaba gained 6.5 percent, Tencent jumped 5.7 percent and Meituan climbed 5.3 percent.
Meanwhile, Japanese shares closed lower on the last trading day of the year as investors booked profits after recent strong gains. The continued surge in coronavirus cases and confirmation of new virus strains in Japan that were first detected in the U.K. and South Africa weighed on the markets.
The benchmark Nikkei 225 Index dropped 123.98 points or 0.5 percent to 27,444.17 and the broader Topix closed down 14.50 points or 0.8 percent at 1,804.68. However, the Nikkei index, which jumped to a 30-year high on Tuesday, gained 16 percent in 2020.
Market heavyweight SoftBank Group edged up less than 0.1 percent and Fast Retailing rose 1.8 percent. Among the major gainers, Kawasaki Kisen Kaisha rose 2.0 percent, Mitsubishi Motors advanced 1.4 percent and ANA Holdings added 1.2 percent.
Conversely, Seiko Epson fell 3.9 percent, Mitsui E&S Holdings dropped 3.6 percent and Sapporo Holdings declined 3.3 percent.
Australian shares closed lower following news that a second coronavirus cluster has developed in Sydney and a South African COVID-19 variant was detected in Queensland.
The benchmark S&P/ASX 200 Index declined 17.90 points or 0.3 percent to 6,682.40 and the broader All Ordinaries Index dropped 19.20 points or 0.3 percent to 6,942.90.
In the tech sector, AfterPay slid 3.7 percent, WiseTech Global fell 1.9 percent and Appen lost 1.8 percent.
In the banking sector, Commonwealth Bank, ANZ Banking and National Australia Bank closed lower in a range of 0.4 percent to 0.5 percent. Westpac Banking closed unchanged.
Among the major miners, BHP Group rose 0.5 percent and Rio Tinto added 0.4 percent.
Seoul stocks recovered after a weak start to close the final session of this year at an all-time high. The benchmark Kospi shot up 52.96 points or 1.9 percent to 2,873.47, hitting record highs for the fourth straight day.
Market bellwether Samsung Electronics jumped 3.5 percent, while chipmaker SK Hynix rose 2.2 percent. Automaker Hyundai Motor advanced 0.8 percent and steelmaker POSCO added 0.7 percent.
European stocks are turning in a lackluster performance on Wednesday even as AstraZeneca’s COVID-19 vaccine received its first approval for emergency supply in the U.K. amid the massive vaccination drive across Europe.
Investors remain concerned amid uncertainty about whether the U.S. Senate would approve a measure increasing the size of stimulus checks to $2,000.
While the German DAX Index has dipped by 0.3 percent, the French CAC 40 Index is down by 0.1 percent and the U.K.’s FTSE 100 Index is just below the unchanged line.
President Donald Trump continued demanding $2,000 COVID-19 relief checks, instead of $600, and the U.S. House of Representatives voted to approve the measure. However, in the Senate, the move was stalled, as Republicans blocked a swift vote proposed by Democrats.
The investor sentiment also reflects the fact that Britian’s automatic access to the EU’s financial markets may come to an end on December 31 as the Brexit trade deal excludes any pact regarding the financial markets.
In Covid-19 news, the U.K. Medicines and Healthcare products Regulatory Agency has approved AstraZeneca’s COVID-19 vaccine, co-developed by the University of Oxford, for emergency supply in the U.K., with the first doses being released today. The vaccinations may begin early in the New Year.
In economic news, U.K. house prices grew at a faster pace in December, data published by the Nationwide Building Society showed. House prices climbed 7.3 percent year-on-year in December following November’s 6.5 percent increase.
As per flash data published by the statistical office INE, Spain’s consumer prices continued to decline at the end of 2020. Consumer prices decreased 0.5 percent year-on-year in December after easing 0.8 percent in November.
U.S. Economic Reports
MNI Indicators is scheduled to release its report on Chicago-area business activity in the month of December at 9:45 am ET.
The Chicago business barometer is expected to edge down to 57.0 in December from 58.2 in November, although a reading above 50 would still indicate growth.
At 10 am ET, the National Association of Realtors is due to release its report on pending home sales in the month of November. Pending home sales are expected to come in unchanged.
A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.
The Energy Information Administration is scheduled to release its report on oil inventories in the week ended December 25th at 10:30 am ET.
Crude oil inventories are expected to decrease by 2.1 million barrels after dipping by 0.6 million barrels in the previous week.
Stocks In Focus
Shares of JD.com (JD) are seeing pre-market trading after the Chinese e-commerce company revealed in an SEC filing that it is exploring a potential spin-off of its JD Cloud & AI business to JD Digits.
Clothing company Levi Strauss (LEVI) may regain ground after falling sharply in recent sessions after Guggenheim raised its price target on the company’s stock to $24 per share from $20 per share.
Vornado Realty Trust (VNO) may also move to the upside after Argus upgraded its rating on the REIT’s stock to Buy from Hold.
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