Finance News

Dow futures bounce 200 factors and get well from 5 consecutive days of loss

US stock index futures pointed to a market rally on Monday as the S&P 500 made its longest daily losing streak since February.

Futures contracts pegged to the Dow Jones Industrial Average rose 226 points, or 0.7%. S&P 500 futures gained 0.6% and Nasdaq 100 futures gained 0.5%.

All three major averages finished lower on Friday, with the Dow and S&P recording their fifth consecutive day of losses while the Nasdaq Composite recorded its third consecutive negative price. For the S&P 500, that was its worst losing streak since February 22nd. For the week, the Dow and S&P were down 2.15% and 1.69%, respectively, their worst weekly performance since June. Tech-heavy Nasdaq had its worst week since July, down 1.61%.

Covid cases appear lower in the US, with a 7-day average through Friday of about 136,000, compared with 157,000 average new cases in late August, according to the CDC. Pfizer's Covid vaccine could be approved for children by the end of next month, known sources told Reuters.

Names related to the reopening resulted in profits in pre-trading. Delta Air Lines and United Airlines shares rose 1.4% each. Carnival Corp added 1.3%. Traditional cyclical stocks GM and Citigroup both gained 1%. MGM shares rose nearly 2% after being upgraded by Bernstein to outperform.

"Vaccinations plus immunity should cause cases to eventually decline. The full reopening and associated expenses have been pushed aside," wrote UBS strategist Keith Parker, who sees the S&P 500 up another 4% by the end of the year.

It was a broad boom, with tech stocks also gaining ground. Apple gained around 0.8% in pre-trading.

All three futures contracts were previously subdued as investor sentiment may have been hurt by heavy losses in Asian trading on Monday, where the Hong Kong Hang Seng index fell about 2% on regulatory fears for sectors like financial technology and electric vehicles.

Fears of inflation have contributed to the recent price falls in the market. Data released on Friday showed that producer prices rose 0.7% in August and 8.3% year-over-year, the largest annual increase since records were first recorded in November 2010.

The closely watched consumer price index will be released on Tuesday. At that point, the road will see how much of the increased cost is passed on to consumers. Economists surveyed by FactSet expect consumer prices to have risen by 5.3% annually in August. The retail sales data will be released later in the week.

"Delivery bottlenecks, inventory shortages, higher raw material prices and higher shipping rates have all contributed to higher input costs," said Charlie Ripley, senior investment strategist at Allianz Investment Management. "The [Friday] wholesale price data should open the Fed's eyes as inflationary pressures still don't seem to be easing and are likely to be felt by consumers in the months ahead," he added.

Stocks have been under pressure since the Labor Department's August job report released on September 3 missed expectations. The market is buzzing with concerns that the pandemic will continue to stifle economic growth while hot inflation will drive the Federal Reserve to act.

"The negative impact of the delta on cyclical trading is clear," noted Jefferies strategists. "It's becoming increasingly evident that the effects of the Delta have delayed any attempt by the Federal Reserve to throttle, as well as giving new impetus to big tech stocks, with growth that has outpaced this quarter so far Has."

The Federal Reserve will begin its two-day monetary policy meeting on September 21, during which investors will look for clues about the central bank's bond-buying program.

Despite last week's losses, the large averages are still relatively close to their record highs. the Dow is 2.87% below its all-time high, while the S&P is 1.92% below its high. The Nasdaq Composite, meanwhile, is down 1.87% from its record.

For the year, all three have posted double-digit percentage gains, but the ongoing effects of Covid-19 could slow the pace of the recovery.

"The prospects for economic growth after the pandemic have cooled in time for the fall," Goldman Sachs said in a statement to its customers on Friday. "Within the market, prices have been reflecting the weakening economic environment for months," the company said. Last week, Goldman lowered its fourth quarter GDP growth forecast, citing the impact of the Delta option on consumer spending.

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