Stock futures opened flat to slightly higher Wednesday evening ahead of the final session of the year.
Contracts on the Dow added about 30 points, or 0.1%, after the index hit a fresh record closing high during the regular session. The small-cap Russell 2000 outperformed with a gain of more than 1%, and the S&P 500 closed within 0.1% of its recent record closing high.
Stocks are set to close out the year with strong returns, even given the lingering economic strain induced by the coronavirus pandemic. U.S. economic output remains below pre-virus levels even after a record third-quarter surge, and the labor market is still 9.8 million jobs short of its total before the pandemic hit in March. On Thursday, the Labor Department’s final weekly unemployment claims report for 2020 is expected to show another more than 800,000 Americans filed for first-time jobless claims, for a sum about four times the pre-pandemic weekly average.
But heading into 2021, a vaccine is roll-out under way and $900 billion in additional stimulus is set to be unleashed into the economy, offering hopes for a rebound in economic growth and corporate profitability.
“In the last couple quarters, the market probably got most of what it wanted to see,” Tim Courtney, chief investment officer for Exencial Wealth Advisors, told Yahoo Finance. “It got the vaccines with the high efficacy rates, it got very, very low interest rates, and so far low inflation moving into 2021. It’s got what looks like a divided Congress, although that’s still up in the air.”
“But moving into next year, it’s going to be how these things play out. Will the vaccine be distributed efficiently, effectively? Will consumer confidence rise to the point where we could get some of this deferred consumption in 2021, which is what the market wants to see? And will consumers be healthy enough, will these stimulus checks … keep them above water long enough to have some kind of return to normalcy? The market seems to be priced for these things to work out relatively well.”
While the latest stimulus package will offer a lifeline to many businesses and individuals impacted by the pandemic, many have called for further relief to help bridge the gap for the most vulnerable populations until a longer-lasting economic reopening can take place. Though the House of Representatives voted to increase direct payments to consumers to $2,000, up from the $600 offered in the current virus relief bill, the Senate has so far suggested it will not advance the measure on its own.
In the the wake of this year’s historic infusion of crisis-era fiscal and monetary policy, the S&P 500 is set to close out the year with a total return of more than 17%.
“I think that the zero interest rate phenomenon that we find ourselves in is covering over a lot of problems for the market. We do have the issue that there is no alternative,” Courtney added. “And when you have really no effective alternative to stocks, I think you are going to see that markets will shrug off bad news and use the good news to justify the current valuations. I think some level of that is justified when there truly is no alternative, no other place to go get a real return in liquid markets.”
Meager treasury yields have also pushed investors into other risk assets, and Bitcoin (BTC-USD) prices on Wednesday surged to a fresh record high of more than $28,000, just two weeks after breaching the $20,000 level for the first time ever.
6:01 p.m. ET Wednesday: Stock futures tick up
Here were the main moves in markets as the overnight session kicked off Wednesday evening:
S&P 500 futures (ES=F): 3,726.00, up 1.75 points or 0.05%
Dow futures (YM=F): 30,334.00, up 32 points or 0.11%
Nasdaq futures (NQ=F): 12,847.5, up 6 points or 0.05%
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