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Getty Images Democratic presidential candidate Joe Biden greets restaurant patrons at Buttercup Diner in Oakland, Calif.
U.S. stock index-futures were poised to open sharply higher Wednesday after results of the Democratic party’s primary vote to nominate a presidential candidate in November’s election boosted the chances of former Vice President Joe Biden.
On Tuesday stocks had slumped when a rare emergency interest rate cut by the Federal Reserve failed to inspire investor confidence in policymakers’ ability to counter the coronavirus epidemic.
Investors also were awaiting key data points in U.S. private-sector employment and the Fed’s Beige Book, an anecdotal account of business conditions in the central bank’s regional districts.
How are major benchmarks performing?
Futures for the Dow Jones Industrial Average YMH20, +2.61% were up 714 points, or 2.5%, at 26,593, those for the S&P 500 index ESH20, +2.28% climbed 73.90 points, or 2.5%, to 3,071, while Nasdaq-100 futures NQH20, +2.34% advanced 212.50 points to reach 8,796.75, a gain of about 2.5%.
On Tuesday, the Dow DJIA, -2.94% finished 785.91 points, 2.9%, to 25,917.41, after being down by as many as 997.04 points. Meanwhile, the S&P 500 SPX, -2.81% fell 86.86 points, or 2.8%, to 3,003.37. The Nasdaq Composite Index COMP, -2.99% retreated 268.07 points, or 3%, to end at 8,684.09.
What’s driving the market?
Some analysts were attributing signs of early gains for stock indexes and a pullback in U.S. Treasury bond yields from record lows seen Tuesday to Vice President Joe Biden’s victories during the Democratic primary contest on Tuesday.
“What if the real culprit behind the market’s weakness are the improved prospects of a fringe candidate winning the Democratic nomination, getting one-step closer to the White House,” wrote Jeff DeGraff, analyst at Renaissance Macro Research, in a Wednesday research note.
Biden’s string of Super Tuesday victories, winning 9 of 14 states including Texas, was seen as blunting the momentum of Bernie Sanders, a candidate that has been characterized by some on Wall Street as antibusiness.
Moves in stock futures on Wednesday came after the Fed jolted markets with a half-a-percentage-point rate cut on Tuesday, saying that while the economy’s fundamentals remain strong, the “coronavirus-poses evolving risks to economic activity.”
Stocks ended Tuesday with losses of about 3% and the 10-year Treasury note yield fell below 1% for the first time in a century and a half.
Some investors are venturing back into the market, which has become more prone to wild swings amid the spread of COVID-19 epidemic, the infectious disease that originated in Wuhan, China last year.
“The magnitude of the market sell-off and the rapid policy reaction encouraged us to recently add to our risk positions” through additional exposure to U.S. high-yield credit versus high-quality bonds, Mark Haefele, UBS Wealth Management’s global chief investment officer, wrote in a note.
Steve Todd, editor of the popular Todd Market Forecast said that stock markets have been oversold by some measures, with statistical readings like relative strength index, or RSI, showing levels not seen since 2018.
“Has all the doubt about the virus been laid to rest? Not by a long shot, but at some point, sellers run out of ammunition,” he wrote in a late Tuesday report.
Looking ahead, investors will watch for a reading of private-sector employment from Automatic Data Processing Inc. due at 8:15 a.m. Eastern Time, coming days ahead of the closely watched U.S. Labor Department report on nonfarm payrolls, on Friday.
Investors also will watch for a report on the U.S. service sectopr, with the IHS Markit nonmanufacturing index due at 9:45 a.m. ET and the closely followed ISM report 15 minutes later. The Beige Book is due at 2 p.m. ET, and may be parsed for fresh clues about the impact, if any, from the global coronavirus outbreak.
Which stocks are in focus?
- AT&T’s shares rose in premarket trading Wednesday, after the telecommunications and media company announced another $4 billion accelerated share repurchase program, starting in April.
- Shares of Navistar International Corp. NAV, -1.69% were indicated down a little over 1% in premarket trading Wednesday, after the commercial truck maker reported a bigger-than-expected fiscal first-quarter loss, but said it had received an unsolicited buyout bid during the quarter.
- Amazon.com Inc.’s shares AMZN, -2.30% may be in focus after am employee in Seattle tested positive for the coronavirus, according to an internal memo obtained by the Guardian newspaper and other media outlets.
How are other assets faring?
The benchmark U.S. 10-year Treasury note TMUBMUSD10Y, -0.18% was at 0.99%, one day after it made a historic yield moved below 1% Yields rise as prices fall.
Gold for April delivery GCJ20, +0.23% gained 0.1% to $1,646.30 an ounce, while CLJ20, +1.76% gained 2% to trade at $48.12 a barrel on the New York Mercantile Exchange.
The Cboe Volatility index VIX, -12.68% was at 32.03, down 13%, the so-called VIX falls as stocks rise and is used as a gauge of implied volatility in the stock market. It’s historic average is around 19.
In Asia overnight, the Shanghai Composite Index SHCOMP, +0.63% gained 0.1% and Tokyo’s Nikkei 225 NIK, +0.08% rose 0.3%. The Kospi 180721, +2.24% in Seoul gained 2.1%.
Hong Kong’s Hang Seng HSI, -0.24% edged down 0.2% while the S&P/ASX 200 XJO, -1.71% in Sydney tumbled 1.7%.
European markets were trading higher. The Stoxx Europe SXXP, +1.93% advanced 1.9%, while the FTSE 100 FTSE, +0.02% also added about 1.9%.
