Dow Futures Rebound As Recovery Hopes Trump Vaccine Concerns; All 50 States Now Easing Lockdowns

Investors continue to fear a second wave of coronavirus infections later in the year, but trillions in government spending and easing lockdown restrictions are keeping stock markets supported.

The Wednesday Market Minute

  • Global stocks mixed as investors weigh signs of economic re-openings against reports that cast doubt on a near-term coronavirus vaccine.
  • Stat news reports that virology experts have questioned the lack of data in Moderna's official statement, while noting the silence of its study partner, the National Institute for Allergy and Infectious Diseases.
  • Oil prices gain ahead of Energy Department data on crude stockpiles, while Treasury bond yields hold firm ahead of the first sale of 20-year notes since 1986.
  • U.S. equity futures suggest a firmer open on Wall Street ahead of mortgage data at 7:00 am Eastern time and before-the-bell earnings from Target and Lowe's.

U.S. equity futures bounced higher Wednesday, clawing back some of Wall Street's losses from late yesterday, as investors weigh further re-openings in major economies around the world against reports that cast doubt on a near-term coronavirus vaccine.

With infection rates in Germany falling steadily, and countries around  the world easing lockdown restrictions, slow but steady indications of what is likely to be a long economic recovery are starting to find traction. At home, all 50 U.S. states have eased stay-at-home orders following Connecticut's re-opening, which begins today.

That view has helped oil prices rally kept Treasury bond yields low despite a wave of new supply -- and trillions in government and central bank support -- while bolstering a stock market rally on Wall Street that's lifted the S&P 500 more than 3.6% over the past week.

Reports that the positive results from Moderna's  (MRNA) - Get Report phase 1 coronavirus vaccine study were being questioned by experts took some air out of yesterday's rally, as did data from China today that suggests new cases in the epicenter of the outbreak are displaying a different pathogen than they did in the early stages of the pandemic. 

Bank of America's May Fund Manager's Survey, a poll of more than 190 investors who control nearly $600 billion in assets, found that more than two-thirds of respondents said the current upturn is a 'bear market rally" that is unlikely to hold, the highest level of pessimism since December 2007. 

Still, with Treasury Secretary Steve Mnuchin considering an extension of the small business payroll lending program, and Congress debating trillions more in support for states and essential workers, stocks remain under a firm footing even as most fund managers expected a protracted recovery and worry about a second wave of coronavirus infections later in the year.

Contracts tied to the Dow Jones Industrial Average suggest a 320 point opening bell decline, while those linked to the S&P 500 are indicating a 34 point advance for the broader benchmark ahead of earnings from Target  (TGT) - Get Report and Lowe's Companies  (LOW) - Get Report.

S&P 500 companies are on pace to see a 12.1% decline in first-quarter profits, according to data from Refinitiv, a figure that is likely to balloon to around -42% over the three months ending in June. 

The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.1% higher at 99.44 while benchmark 10-year Treasury note yields held at 0.693% ahead of a $20 billion auction of 20-year bonds later today - the first sale of that type of maturity since 1986. 

Oil prices were also modestly higher heading into the Wednesday session after data from the American Petroleum Institute showed a surprise 4.8 million barrel decline in domestic crude stocks, a figure that, if confirmed later today by the Energy Department, will indicate the first drawdown in fifteen weeks. 

Brent crude contracts for July delivery, the global benchmark, were seen 28 cents higher at $34.93 per barrel while WTI contracts for the same month -- the new U.S. benchmark -- edged 3 cents higher to $31.99 per barrel.

European stocks were little-changed midway through the Wednesday session, with investors citing concerns for a COIVD-19 vaccine and the potential for a second wave of infections, while stocks in Asia overnight were largely unmoved ahead of a series of key meetings of China communist party officials later this week in Beijing.