Friday November 20th

20-11-2020

Dow futures edge lower as fresh virus restrictions raise concerns about recovery

U.S. stock index futures were slightly lower early Friday as rising new coronavirus cases cast doubt on a swift economic recovery. Also weighing on sentiment was a disagreement between the Treasury Department and the Federal Reserve over the continuation of funding for some of the emergency programs implemented during the recession. Futures on the Dow Jones Industrial Average implied an opening drop of less than 50 points. S&P 500 futures and Nasdaq 100 futures were also little changed. On the bullish side, markets got more good news on the vaccine front with Pfizer and BioNTech saying they will apply for an emergency use authorization for their vaccine from the Food and Drug Administration on Friday. The companies said they can be ready to ship the vaccine within hours after FDA approves the authorization. The market’s rally to records slowed down in recent days as more immediate concerns about the worsening pandemic overshadowed optimism toward a viable vaccine. The U.S. seven-day average of daily new Covid-19 infections now stands at 161,165, according to a CNBC analysis of John Hopkins data, 26% higher than a week ago. Many states have rolled back reopening plans and implemented fresh restrictions to curb the spread. California Gov. Gavin Newsom on Thursday issued a “limited Stay at Home Order” on a majority of the state’s residents, requiring nonessential work and gatherings to cease between 10 p.m. and 5 a.m. Meanwhile, the Centers for Disease Control and Prevention advised Americans against traveling for Thanksgiving. President-elect Joe Biden said Thursday he will not order a national shutdown as the country heads into a tough holiday season, calling the measure “counter-productive.” Meanwhile, Treasury Secretary Steven Mnuchin is seeking to end a handful of the Fed facilities that bought corporate bonds as well as the Main Street Lending Program targeted towards small- and medium-sized businesses. The move has drawn pushback from the central bank, which said the programs continue to serve an important role to support the vulnerable economy. People familiar with the matter told CNBC’s Steve Liesman, however, that either Mnuchin or a new Treasury secretary from the Biden administration could decide to revive the emergency lending programs under a new agreement with the Fed. “Mnuchin’s move will tighten financial conditions and removes a safety net for markets at the wrong moment,” Krishna Guha, Evercore ISI vice chairman and head of global policy and central bank strategy, said in a note on Thursday. Bond king Jeffrey Gundlach said Mnuchin’s request would shut down the corporate credit programs that “propped up” the markets in the spring. The DoubleLine Capital CEO raised the question if the markets can hold up without the Fed’s support, saying “the training wheels are coming off.” The overnight action followed slight gains on Wall Street led by tech shares on Thursday. The Dow eked out a 40-point gain, while the S&P 500 and the Nasdaq rose 0.4% and 0.9%, respectively. It marked the first positive day in three for the major averages. The 30-stock Dow and the S&P 500 both reached record closing highs on Monday following promising vaccine news. “The market is churning a bit as investors digest the recent ramp higher, grapple with a worsening in the Covid-19 spread,” Tony Dwyer, Canaccord Genuity’s chief market strategist, said in a note. Investors also digested signs that lawmakers could resume talks over a new Covid-19 relief bill amid the worsening pandemic. Sen. Chuck Schumer, D-N.Y., said Thursday that Senate Majority Leader Mitch McConnell, R-Ky., has agreed to restart negotiations. Asia-Pacific markets traded mixed on Friday as investors remained cautious over the short-term economic impact of the coronavirus as cases around the world continue to rise. The Nikkei 225 index in Japan fell 0.42% to 25,527.37 while the Topix index finished fractionally higher at 1,727.39. South Korea’s Kospi index gained 0.24% to 2,553.50. On the Chinese mainland, the Shanghai composite rose 0.44% to 3,377.73, the Shenzhen composite was up 0.6% at 2,289.51 and the Shenzhen component added 0.54% to 13,852.42. In Hong Kong, the Hang Seng index gained 0.33% in late afternoon trade. Oil prices firmed on Friday, and were on track for a third consecutive weekly rise, buoyed by successful COVID-19 vaccine trials, while renewed lockdowns in several countries to limit the spread of the virus capped gains. Prospects for effective COVID-19 vaccines and hopes OPEC and its allies will keep production in check have bolstered oil markets this week. Brent crude futures were up 33 cents, or 0.75%, at $44.53 a barrel. The more active U.S. West Texas Intermediate (WTI) January crude contract gained 17 cents, or 0.4%, to $42.07 a barrel. The WTI contract for December, which expires on Friday, was up 26 cents at $42.00. Both benchmarks are up more than 4% so far this week. Gold was headed for a second weekly decline on Friday on growing optimism about COVID-19 vaccines, with the U.S. Treasury’s call to end emergency loan programmes also limiting bullion’s safe-haven appeal. Spot gold remained little changed at $1,866.75 per ounce and was down 1.1% for the week. U.S. gold futures were up 0.2% at $1,865.70.