Dow Futures Extend Gains On Stimulus Progress With Fed Meeting In Focus; New York Braces for Major Snowstorm

The Wednesday Market Minute

  • Global stocks extend gains as progress develops from both stimulus talks in Washington and Brexit negotiations in Europe.
  • Congressional leaders strike a positive tone from talks that could see a $750 billion coronavirus aid package agreed by the end of the week.
  • U.K. lawmakers told to be on standby as negotiations point to potential breakthrough just two weeks before Britain leaves the bloc.
  • European PMI data impress in December, thanks to a surge in services activity, lifting stocks to a 10-month high.
  • The Federal Reserve wraps up its final policy meeting of the year with investors anticipating a focus on renewed bond purchases to maintain support for financial markets.
  • The U.S. northeast braces for the first major storm of the year, with forecasts suggesting as much as a foot of snow falling in and around the New York metropolitan area.
  • The U.S. dollar falls to a fresh 2018 low against its currency peers, with benchmark 10-year note yields rising to 0.925%.
  • U.S. equity futures point to a firmer open on Wall Street ahead of November retail sales data at 8:30 am Eastern time and the Fed rate decision at 2:00 pm Eastern time.

U.S. equity futures extended gains Wednesday, while the dollar tumbled to fresh multi-year lows, as markets looked to potential breakthroughs on stimulus talks in Washington and Brexit negotiations in Europe.

House Speaker Nancy Pelosi, along with her Democratic colleague in the Senate, Chuck Schumer, met with Republican majority leaders Mitch McConnell and Kevin McCarthy on Tuesday in a meeting that all four described as positive in terms of reaching an agreement on a coronavirus relief bill before Friday’s federal funding deadline.

The apparent progress, which followed months of wrangling and partisan bickering even as coronavirus cases surged and jobless claims accelerated into the final weeks of the year, could finally result in a $750 billion injection into the unsteady economy.

More targeted support may also be on tap from the Federal Reserve, which wraps up its final two-day policy meeting of the year this afternoon amid expectations of a boost to its $120 billion per month in bond purchases and signals that benchmark interest rates will remain at near zero for at least the next three years.

U.S. equity futures look set to add gains to last night’s rally on the back of the stimulus progress, as well as indications from Europe that a Brexit trade deal could be agreed in the coming days as London and Brussels prepare for Britain’s exit from the bloc on December 31.

Futures contracts tied to the Dow Jones Industrial Average, which closed well over 30,000 points last night, suggest a 70 point opening bell gain while those linked to the S&P 500, which is up 14.3% for the year, are priced for an early 9 point bump.

Afternoon activity, however, could be curtailed by an approaching storm that threatens to leave more than a foot of snow in the New York metropolitan area. 

European shares, meanwhile, traded at a 10-month high in early Wednesday dealing, fueled by progress in Brexit talks as well as a private ready of economic activity for the month of December that showed a surge in the services sector and overall gains that could prevent the bloc from slipping back into recession.

The Stoxx 600 was marked 0.84% higher in the opening hours of trading, lead by a 1.6% advance for the trade-sensitive DAX performance index in Germany. Britain’s FTSE 100 gained just under 1% in London.

On foreign exchange markets, the U.S. dollar index fell to the lowest levels since early 2018 as traders continued to factor-in the increased spending — and resultant borrowing — from Congress as it nears a coronavirus relief package. The index was marked 0.3% lower at 90.198 while benchmark 10-year Treasury note yields edged higher to trade at 0.925%.

The weaker dollar support gains in the oil markets, although the upside was capped by data from the American Petroleum Institute last night which showed a 2 million increase in domestic crude stocks.

Brent crude futures for February delivery were marked 20 cents higher at $50.96 per barrel, while WTI futures for January edged 17 cents higher to $47.79 per barrel, the highest since early March.

Overnight in Asia, Wall Street’s late-afternoon rally, fueled in part by 5% gain for Apple Inc.  (AAPL) – Get Report, spilled over into regional stocks and those in the tech giant’s supply chain following a report from the Nikkei business newspaper that said it was preparing to increase iPhone manufacturing by as much as 30% next year.

The MSCI ex-Japan index jumped 0.92% heading into the final hours of trading while the Nikkei 225 in Tokyo rose 0.26% to close at 26,757.40 points.