U.S. stock index futures were slightly higher in overnight trading on Wednesday as investors continued to assess progress on additional stimulus measures as well as developments in the Covid-19 vaccine space.
Futures contracts linked to the Dow Jones Industrial Average gained 26 points while S&P 500 futures rose 0.1%. The Nasdaq 100 futures were flat.
Shares rose to record highs during Wednesday's regular trading hours. But the profits were short-lived in the end, and the key averages closed in the red.
The Dow closed 105 points lower, down 0.35%. The S&P 500 fell 0.8%. The Nasdaq Composite retreated 1.9% on its worst day since October 30th. The tech-heavy index also achieved a four-day winning streak.
The downside in the broader market was led by the tech sector, with chip stocks in particular seeing weakness.
"Today has been a classic sector rotation and resumption of medium reverse trade that started modestly in September and continues through the end of the year – and we believe it will take a lot longer," said David Bahnsen, chief investment officer at The Bahnsen Group.
Shares fell from their highs after Senate majority leader Mitch McConnell told Politico that Republicans and Democrats "are still looking for a way forward" to get additional tax aid.
McConnell said he wanted Congress to pass a coronavirus relief bill that does not provide legal immunity for businesses or state and local government. Chuck Schumer, chairman of the Senate Minority, D-N.Y., Said McConnell's proposal to move the stimulus talks forward without state and local government assistance was not in good faith.
The ongoing negotiations come as the Covid-19 crisis in the US worsens. However, the launch of the Pfizer vaccine in the UK, which began Tuesday, has sparked optimism. And some Wall Street strategists believe a widespread vaccine will push inventory levels to new highs in 2021.
"Equities face one of the best prerequisites for sustained earnings next year," JPMorgan said in a statement to clients on Wednesday. "We expect markets to be driven by the recovery from the COVID-19 crisis due to highly potent vaccines and ongoing extraordinary financial and fiscal support," the company added. JPMorgan's S&P 500 target for 2021 is 4,400, an increase of nearly 20% from Wednesday's reference average closing price.
On the flip side, Commerce Street Capital CEO Dory Wiley believes that caution is advised. He pointed out that 90% of stocks on the NYSE are trading above their 200-day moving average, suggesting that valuations may be stretched.
"The timing of the market is not always well advised, and cutting back may miss out on some gains in the next two months, but after such good returns in a clearly terrible fundamentals, I think that making a profit and switching to cash is profitable, not on bonds. " Sense here, "said Wiley.
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