US stock futures point higher after Dow broke 30,000 as investors cheer vaccines, Biden's new administration
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- US stock futures point to a modestly higher start to trade later, after the Dow Jones crossed 30,000 for the first time on Tuesday, lifted by optimism over a vaccine and Biden's picks for his administration.
- European markets encountered some profit-taking, nudging the FTSE 100 and the DAX down by around 0.2%, while oil prices extended this week's rally, rising for a fourth day to their highest since early March.
- Markets will be encouraged and incentivized to take more risk. "Eventually, there will be a price to pay – but worry about that another day," Stephen Innes, chief market strategist at broker Axi, said.
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US stock futures pointed to a potentially record-breaking start to trade on Wall Street later on Wednesday, buoyed by optimism that a solution for COVID-19 will deliver the global economy from deeper harm.
The Dow Jones closed above 30,000 points for the first time in history on Tuesday, buoyed by a cocktail of optimism over the rollout of a COVID-19 vaccine and much more clarity on the political front, after President Donald Trump appeared to clear the way for Joe Biden's administration to start its transition process.
President-elect Biden has already started to name members of his cabinet but for markets, the most important was that of Janet Yellen, the former head of the Federal Reserve, to the position of Treasury Secretary.
"Yellen and US Fed Chair Jerome Powell are the new normal economic power brokers," Stephen Innes, chief market strategist at broker Axi, said.
"They will aim to get the real economy to full employment. Both have learned from past mistakes. Exceptionally easy financial conditions will prevail for much longer than usual. Markets will be encouraged and incentivized to take more and more risk. Eventually, there will be a price to pay – but worry about that another day," he said.
Futures on the Dow Jones were trading down 0.1% at 29,968 points, suggesting the index may open at, or close to, Tuesday's record high above 30,000. S&P 500 and Nasdaq 100 futures were trading down 0.1% and up 0.1%, respectively.
Yellen, a policymaker that has always tended to err on the side of dovishness, will be the first woman to have headed up the Fed, the Treasury and the Council of Economic Advisors. She has advocated for more spending to protect the economy, and investors have generally taken her appointment as a positive.
However, the final say in any stimulus bill will come from Republican Mitch McConnell, the Senate Majority Leader.
"The impending appointment of ex-Fed Chair Yellen as Treasury Secretary is to be welcomed – a safer pair of hands is hard to imagine," Pantheon Macroeconomics chief economist Ian Shepherdson said in a note on Tuesday.
"As Treasury Secretary, Dr. Yellen will have a powerful bully pulpit, alongside Fed Chair Powell to make the case for more fiscal action. But if Republicans are still in charge, the key decisions will be made by Majority Leader Mitch McConnell," Shepherdson said.
On the European market, the biggest benchmark indices eased, leaving the FTSE 100 down 0.2%, the DAX down 0.3% and the CAC 40 unchanged on the day. On the Asian markets overnight, Chinese blue-chips encountered a similar bout of profit-taking, leaving the Shanghai Composite down 1.2%, while Seoul's KOSPI fell 0.5%.
Oil extended its rally, rising for a fourth day to its highest in nearly nine months. The Brent crude futures market suggests traders are at their most bullish over the demand outlook in 2021 in months. This is due to the rollout of a vaccine and prospect of low US interest rates, which will encourage businesses and consumers alike to invest.
The market shrugged off an unwelcome rise in US inventories of 3.8 million barrels in the latest week. Brent crude was last up 1.4% at $48.46 a barrel, while WTI crude gained 1.2% to trade at $45.47 a barrel. Both contracts have risen by more than 8% so far this week, making them the best-performing commodities so far, compared with laggards silver and gold, which have fallen by 4.3% and 3.5%, respectively.
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