U.S. stock futures were solidly higher early Wednesday after the S&P 500 experienced its first positive day in five trading sessions.
Dow futures pointed to a gain of more than 200 points. S&P 500 and Nasdaq 100 futures also implied a higher open.
Better-than-expected earnings from Nike and KB Home lifted sentiment on Wall Street after the bell on Tuesday. Nike saw digital sales rise 82%, driving the stock up after hours. However, shares of Tesla fell in extended trading after Elon Musk offered new delivery predictions for 2020 and detailed a new battery design that it claims will make its cars cheaper to produce.
On Tuesday, the major averages snapped multi-day losing streaks, all closing in the green. The Dow Jones Industrial Average climbed 140 points and the S&P 500 climbed 1.1%. The technology-heavy Nasdaq Composite was the relative outperformer, popping 1.7% as Amazon surged 5.7%.
“As soon as the S&P 500 reached the official correction zone near a 10% decline yesterday, ‘dip buyers’ emerged and have been evident ever since,” Jim Paulsen, chief investment strategist at The Leuthold Group, told CNBC. “These buyers, armed with cash holdings, may be driven less by the ‘fear of missing out’ than they are by the ‘opportunity to finally get in.'”
Shares of megacap technology stocks — which have suffered in September — all closed in positive territory on Tuesday.
“Optimism broadened as the day progressed lifting not only technology and communications stocks for the second day, but ending with eight of the 11 sectors within the S&P 500 Index in the green,” added Paulsen.
Stock gains were capped by concerns about an uptick in coronavirus cases in the U.K. paired with bleaker outlook for a second stimulus bill from the United States Congress. U.K. Prime Minister Boris Johnson announced Tuesday a tightening of economic restrictions and public health measures to slow the spread of Covid-19. Johnson said that the country was at a “perilous turning point.”
U.S. coronavirus deaths topped 200,000 on Tuesday, according to data compiled by Johns Hopkins University.
With stimulus plans at a stalemate in Washington, Federal Reserve Chairman Jerome Powell on Tuesday reiterated to lawmakers that the U.S. economy could begin to decelerate in the months ahead without further fiscal stimulus from Congress. Powell told the House Financial Services Committee that many economic forecasts underlies fiscal action. Powell also reassured investors that the central bank will support the economy “for as long as it takes.”
Powell will testify again on Wednesday to Congress’s Select Subcommittee on the Coronavirus Crisis.
September continues to be a weak month for stocks with all three averages posting three straight weeks of losses. The Dow is down more than 4% in September and the S&P 500 and Nasdaq Composite have lost 5.3% and 6.9% this month, respectively.
“We think equities will move higher over the medium term, thanks to the likely development of a successful vaccine, an end to election uncertainty, the passage of new US fiscal stimulus, and continued extraordinary global monetary support,” said Mark Haefele, UBS Global Wealth Management chief investment officer. “However, the path to ‘more normal’ is likely to be bumpy amid uncertainty over the coronavirus, the U.S. political environment, and U.S.-China tensions. We therefore expect volatility to persist over the balance of the year.”
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