Stock futures pointed to a higher open Tuesday morning, building on record levels from Mondayâ€™s session.
Contracts on the Dow, S&P 500 and Nasdaq each rose about 0.4% with just over two hours to go before the opening bell, adding to the record closing levels each index reached by market close on Monday. Stocks poised to benefit most from fiscal support and a strong economic recovery including cruise lines, airlines and hotel shares extended gains.
The rise came after President Donald Trump signed into law Congressâ€™s $900 billion virus relief bill, despite suggesting he might block the package last week. After Trump signed off on the package, Goldman Sachs economists upgraded their forecast for first-quarter gross domestic product growth to 5% from 3% annualized, citing the boost to consumer spending the $900 billion stimulus package would confer.
Some equity strategists, however, had already priced in the outcome of more fiscal stimulus.
â€œThis stimulus package â€” even though Trump had a little bit of posturing there â€“ we expected this to go through. The news of it going through is not new news to anybody who was looking at the equity markets on a long-term basis,â€ Brian Walsh, Jr., Walsh & Nicholson Financial Group senior financial advisor, told Yahoo Finance. â€œThe $600 stimulus, though, is weak from an individual standpoint. What thatâ€™s actually going to do for people in need is yet to be seen. But the package itself is robust, and it is helping small businesses. Weâ€™ll see how it fares.â€
Late Tuesday, the U.S. House of Representatives voted to pass a bill increasing the stimulus checks to $2,000 from $600, as Trump had demanded last week. However, it remains unclear when or whether the GOP-controlled Senate would take up the bill for a vote. And many Republican members of the chamber previously opposed any payment sum greater than that already included in the $900 billion stimulus package.
Stimulus developments aside, U.S. equities are also likely benefiting from the seasonal period deemed the â€œSanta Claus Rally,â€ which extends over the final five trading days of the year and into the first two sessions of the new year. Over the past 50 years, stocks have ended this period higher 77.9% of the time, and with an average gain of 1.33% for one of the best seven-day periods of the year, according to LPL Financial.
The three major indices are also set to post strong returns this year, after rallying strongly off of their lows in March and flipping from bear to bull market with record velocity. As of Mondayâ€™s close, the S&P 500 was heading toward a 15.6% rise in 2020, the Dow for a 6.5% advance, and the Nasdaq for a staggering 44% jump as Big Tech and software stocks outperformed for much of the year.
As more businesses reopen and a semblance of pre-pandemic life returns in 2021, some strategists are looking for more of a rotation into the â€œreopeningâ€ and â€œepicenterâ€ stocks hardest hit earlier this year, as these companies begin to recover.
â€œWe think the rotation trade is still in play and so when we look back and take stock of 2020, as we come to the end of the year energy and financials are really still the laggards. So we think thereâ€™s some room for them to catch up, particularly as we get to reopening,â€ Rob Haworth, U.S. Bank Wealth Management senior investment strategist, told Yahoo Finance.Â â€œIn the long term, innovation and growth still remain really important, which is why we say for a secular trade, for the long-term, still look on dips to pick up technology, health care, e-commerce sorts of names, but in the short-term as we get to reopening thereâ€™s certainly some room for earnings and revenue to catch up for these companies that have been so hard-hit in 2020.â€
9:00 a.m. ET: U.S. home-price growth accelerates by the most in six years in October
Home prices in the U.S. surged by the most since 2014 in October, underscoring the ongoing strength of the housing market this year.
The S&P CoreLogic Case-Shiller 20-city home price composite index jumped by 1.61% in October over September, far exceeding estimates for a 1.00% rise, according to Bloomberg data. Over last year, the index surged 7.95%, or a full percentage point faster than anticipated.
The jump in home prices has come as low mortgage rates, tight inventory and demand for new work-from-home environments has buoyed the housing market.
8:46 a.m. ET: Populous cities and service industries will â€˜largely return to normalâ€™ next year as virus fears fade: Goldman Sachs
Goldman Sachs economists said in a new note Tuesday they expect that highly populated cities and high-risk service industries will rebound strongly in 2021 even after suffering some of the biggest losses during the pandemic.
â€œWe expect the virus fears that have kept the densest cities and the highest-risk consumer services deeply depressed to fade enough next year for economic life to largely return to normal,â€ the economists led by Jan Hatzius said in a note. â€œTo make this prediction concrete, we consider employment in the leisure and hospitality sector in the New York metropolitan area, which collapsed by nearly two-thirds in April and has leveled off at just 63% of the pre-pandemic level.â€
â€œBy the end of 2021, we expect it to return to at least 90% of its previous level,â€ they added.
To justify their outlook, the economists said they estimated that about one-quarter of the U.S. population is already immune to COVID-19 due to prior infection. They assume half of the population will. be vaccinated by April, and three-quarters by year-end.
â€œThere is some overlap between these two sources of immunity, but in combination they should be enough for the US to reach herd immunity around mid-year,â€ they wrote. â€œIn the months that follow, we expect consumer activities such as dining, travel, and entertainment to return to roughly normal levels.â€
7:13 a.m. ET Tuesday: Stock futures extend gains
Here were the main moves in markets, as of 7:13 a.m. ET: Tuesday:
S&P 500 futures (ES=F): 3,744.75, up 17.25 points or 0.46%
Dow futures (YM=F): 30,445.00, up 140 points or 0.46%
Nasdaq futures (NQ=F):Â 12,833.75, up 51.00 points or 0.4%
Crude (CL=F): +$0.64 (+1.34%) to $48.26 a barrel
Gold (GC=F): +$2.30 (+0.12%) to $1,882.70 per ounce
10-year Treasury (^TNX): +0.8 bps to yield 0.941%
6:02 p.m. ET Monday: Stock futures tick higher as overnight session begins
Here were the main moves in markets as the overnight session kicked off Monday evening:
S&P 500 futures (ES=F): 3,730.75, up 3.25 points or 0.09%
Dow futures (YM=F): 30,317.00, up 12 points or 0.04%
Nasdaq futures (NQ=F):Â 12,844.5, up 11.75 points or 0.09%