Dow futures drop as lawmakers reach last-minute stimulus deal

Stock futures traded deep in the red early Monday as enthusiasm over a coronavirus stimulus deal was overwhelmed by worries over a viral new Covid strain in the U.K.

© Provided by CNBC US Senate Majority Leader Mitch McConnell speaks during a news conference with other Senate Republicans at the US Capitol in Washington, DC, on December 15, 2020.

Futures on the Dow Jones Industrial Average pointed to an opening drop of more than 500 points. Dow futures lost 1.8%. S&P 500 futures shed 2% and Nasdaq 100 futures fell 1.3%.

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Travel-related stocks came under pressure on news of an infectious new coronavirus strain in the U.K., which triggered more severe lockdowns and travel restrictions across Europe.

Norwegian and Royal Caribbean cruise lines shares each dropped more than 9% in premarket trading. Delta Air Lines lost 8% in early trading. Shares of companies that would be hit by stricter lockdown measures fell, including Wynn Resorts and Gap.

The losses came even as lawmakers have reached an agreement on a $900 billion relief package, which would provide direct payments and jobless aid to struggling Americans. The announcement came after negotiators resolved a key sticking point by rolling back the Federal Reserve’s emergency lending powers.

Congress passed a one-day spending bill to avoid a government shutdown that would have started at 12:01 a.m. ET Monday. President Donald Trump signed the measure late Sunday evening, according to White House spokesman Judd Deere.

Lawmakers will vote on the relief and funding bill on Monday.

Now with a stimulus agreed upon, investors may also be seeking to lock in profits after an unexpected banner year. With only two trading weeks left in 2020, the S&P 500 is up 14.8% for the year, while the 30-stock Dow has risen 5.8%. The Nasdaq Composite has rallied 42.2% this year as investors favored high-growth technology companies.

The major averages hit record highs recently amid optimism toward fresh coronavirus stimulus as well as the vaccine rollout. Moderna is shipping its first batch of vaccine doses after receiving approval for emergence use from the U.S. Food and Drug Administration. Meanwhile, the vaccines by Pfizer and BioNTech are being distributed to front-line health-care workers around the country. 

“In the eyes of stocks, the inexorable vaccination process, which is only just getting started, is more powerful than the current trends in cases and lockdowns, and this will prevent markets from delving too deeply down a well of pandemic despair,” Adam Crisafulli, founder of Vital Knowledge, said in a note on Sunday. 

“Recall, the three pillars of the rally all remain very much in place: vaccines, strong corporate earnings, and massive stimulus,” he added.

At Monday’s open, Tesla will enter the S&P 500 with a 1.69% weighting in the index, the fifth largest. The stock was down 5% in premarket trading.

On Friday, the Fed announced it will allow the nation’s big banks to resume share buybacks in the first quarter of 2021 subject to certain rules. JPMorgan shares were up 2% in premarket trading.

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