The Tuesday Market Minute
- Global stocks extend gains following record November rally as investors look to Senate testimony from Fed Chair Jerome Powell.
- Powell, in prepared remarks, will caution that the U.S. economy faces a challenging few months as COVID infections accelerate and vaccine distribution slowly works it way into the broader population.
- The U.S. dollar holds at May 2018 lows amid bets the Fed will shoulder most of the stimulus burden as Congress remains deadlocked on new funding.
- Oil prices steady as OPEC delays production cut decision to Thursday following a virtual meeting from Vienna on Monday.
- Tesla shares jump after S&P Dow Jones says carmaker will be added to S&P 500 benchmark on single trading day.
- Wall Street futures point to a firmer open ahead of final November PMI data at 9:45 am Eastern time and Powell's Senate Banking Committee testimony at 10:00 am Eastern time.
U.S. equity futures rebounded firmly Tuesday, following on from the strongest month on Wall Street in decades, even as coronavirus infections hit record daily levels as the pandemic nears its grim one-year anniversary.
Federal Reserve Chairman Jerome Powell will tell lawmakers on the Senate Banking Committee later this morning that the U.S. economy faces a 'challenging' few months as coronavirus infections accelerate and vaccine distribution slowly works its way through the first line of healthcare workers and the country's most vulnerable citizens.
"Recent news on the vaccine front is very positive for the medium term. For now, significant challenges and uncertainties remain, including timing, production and distribution, and efficacy across different groups," Powell said in prepared remarks for his 10:00 am Eastern time appearance with Treasury Secretary Steve Munchin. "It remains difficult to assess the timing and scope of the economic implications of these developments with any degree of confidence."
The cautious assessment, as well as the continued gridlock on stimulus spending in Washington, has investors betting that the Fed will shoulder most of the burden needed to bridge the world's biggest economy during the months it will likely take before any of the developing vaccines are distributed at the kind of scale needed to allow activity to return to pre-pandemic levels.
That bet, which has pushed stocks both at home and abroad to multi-year highs, while holding the U.S. dollar at its lowest levels since mid-2018, looks set to continue Tuesday even as daily infections approach the 200,000 mark.
Futures contracts tied to the Dow Jones Industrial Average suggest a 315 point opening bell gain to start the final month of the year, extending its November advance of 11.84%, while those linked to the S&P 500 are priced for a 36 point boost at the start of trading.
Nasdaq Composite futures, meanwhile, are looking to start off the month with a 100 point gain following November's 11% advance.
Tesla (TSLA) - Get Report shares were a notable early market mover Tuesday, rising 4.4% after S&P Dow Jones, which manages the S&P 500, said the clean-energy carmaker will be added to the benchmark in a single trading session -- December 21 -- that will likely trigger $73 billion in purchases from index-tracking investment funds.
Zoom Video Communications (ZM) - Get Report shares were also on the move, sliding more than 5% after the online conferencing group said increased costs eroded profit margins, clouding a third quarter earnings report that included a tripling of revenues and a Street-beating end of year forecast.
Elsewhere, European stocks were off to a solid start in Frankfurt and London, with the Stoxx 600 rising 0.8% following November PMI data that indicated a slight deceleration in economic activity from the previous month, but still came in well above the 50 mark that separates growth from contraction.
Investors were also buoyed by the formal application by Pfizer Inc. (PFE) - Get Report and its German partner, BioNTech (BNTX) - Get Report, for their developing coronavirus vaccine to EU authorities. The pair filed similar 'emergency use authorization' approval from the U.S. Food & Drug Administration last week.
Away from equities, global oil prices held near $50 a barrel in overnight trading after OPEC leaders, as well as non-member allies such as Russia, delayed a decision on output cuts until Thursday after failing to reach a consensus during a virtual 'closed door' session yesterday.
Reports continue to suggest, however, that Saudi Arabia supports an extension of the current production cut agreement, which is taking 7.7 million barrels of oil from the market each day, until at least March, while a minority of members will push for a tapering of around 2 million barrels per day.
WTI crude futures contracts for January delivery, the U.S. benchmark, traded 23 cents lower from their Monday close in New York and were changing hands at $45.11 per barrel in early European dealing, while Brent contracts for February delivery, the new global benchmark, slipped 13 cents to $47.75 per barrel.
Overnight in Asia, Japan's Nikkei 225 hit a fresh 29-and-a-half year high of 26,787.54 points following Tuesday's gain of 1.34%, helping propel a positive start to the Asia session for the MSCI ex-Japan benchmark, which was marked 1.23% higher heading into the final hours of trading.