Stock futures fell in night trading Thursday as rising new coronavirus cases cast doubt on a rapid economic recovery.
Sentiment was also weighed down by a disagreement between the Treasury Department and the Federal Reserve over whether to continue funding some of the emergency programs launched during the recession.
The futures on the Dow Jones Industrial Average fell 220 points, down more than 200 points when it opened on Friday. S&P 500 futures were down 0.7% and Nasdaq 100 futures were down 0.3%.
The record market rally has slowed in the past few days as more immediate concerns about the worsening pandemic overshadowed optimism about a viable vaccine.
The US 7-day average for daily new Covid-19 infections is now 161,165, 26% higher than a week ago, according to a CNBC analysis of John Hopkins data. Many states have rolled back their reopening plans and introduced new restrictions to contain the spread.
California Governor Gavin Newsom on Thursday issued a "Limited Stay at Home Order" for the majority of the state's residents to cease unnecessary work and gatherings between 10pm. Meanwhile, the Centers for Disease Control and Prevention has advised Americans not to travel for Thanksgiving.
President-elect Joe Biden said Thursday he would not order a national shutdown as the country goes into a tough holiday season, calling the measure "counterproductive".
Meanwhile, Treasury Secretary Steven Mnuchin is trying to end a handful of the Fed facilities that bought corporate bonds, as well as the Main Street Lending program for small and medium-sized businesses. The move has pushed the central bank back as the programs continue to play an important role in supporting the fragile economy.
"Mnuchin's move will tighten financial conditions and, at the wrong time, remove a safety net for the markets," said Krishna Guha, Evercore ISI vice chairman and head of global policy and central bank strategy, in a statement Thursday.
Bond King Jeffrey Gundlach said Mnuchin's motion would end the corporate loan programs that "propped up" markets in the spring. When asked if the markets can keep up without Fed support, the CEO of DoubleLine Capital said, "The exercise bikes are coming off."
The overnight action followed slight gains on Wall Street, led by technology stocks on Thursday. The Dow gained 40 points, while the S&P 500 and Nasdaq gained 0.4% and 0.9%, respectively. It was the first positive day in three for the major averages.
The 30-share Dow and S&P 500 hit record highs on Monday after promising vaccine news.
"The market is moving a bit as investors digest the recent ramp higher and grapple with a worsening Covid-19 spread," Tony Dwyer, Canaccord Genuity's chief market strategist, said in a note.
Investors also digested signs that lawmakers could resume talks on a new Covid-19 relief law amid the worsening pandemic. Senator Chuck Schumer, D-N.Y., Said Thursday that Senate Majority Leader Mitch McConnell, R-Ky., Has agreed to resume negotiations.
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