Stock Futures Rise as Equities Look to Kick Off New Year Higher.

Stock Futures Rise as Equities Look to Kick Off New Year Higher.

Market Outlook and Pointers.


Stock futures rose Monday morning in the first session of 2021, with the three major indices poised to extend December’s momentum.

 

Contracts on the Dow added more than 100 points, or 0.5%, while futures on the S&P 500 also increased by about 0.4%, with about two hours to go until the opening bell. The S&P 500 closed out December with a 3.7% one-month gain and 16% gain for 2020, capping off an extraordinary year in markets despite the backdrop of the pandemic. Bitcoin prices (BTC-USD) also extended their recent rally over the weekend, breaking above $34,000 to set a new all-time high before paring some gains.

 

Markets largely shrugged off the new political noise in Washington, after President Donald Trump urged Georgia’s secretary of state to overturn his defeat to President-elect Joe Biden in the state, based on a phone recording first reported by the Washington Post. The demand came just before Georgia’s Senate runoff elections on Tuesday, which are set to determine control of the chamber given that Republicans currently maintain an only narrow majority.

 

Traders are heading into the new year with a vaccine roll-out underway and more stimulus recently passed, offering hopes of a stronger recovery once inoculations allow the restrictions that have swept the country for months to ease. Still, hurdles exist to the outlook, and one of the biggest deciding factors in economic growth and rebound in profitability for many corporations will be the success of vaccine distribution as COVID-19 cases continue to spike, many strategists have said.

 

“The big question for the global economy over the year ahead will be how quickly populations are vaccinated, particularly among vulnerable groups like the elderly and those with underlying health conditions who make up the majority of hospitalizations,” Deutsche Bank economists including Henry Allen wrote in a note. “If the most affected groups can be vaccinated quickly, that could pave the way for a gradual easing of restrictions and a return to something closer to normality.”

 

“Markets are likely to be closely watching any issues with COVID-19 or the vaccine rollout, not least given the new variants that have been found in the UK and South Africa which spread more rapidly and have been found in increasing numbers of countries,” they added.

 

As of the weekend, the first doses of a COVID-19 vaccine had been given to more than 4 million people in the U.S., comprising over 1% of the nation’s population. However, Dr Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, said President-elect Joe Biden’s goal of ramping up distribution to vaccinate 100 million people in his first 100 days was a “realistic goal,” according to an interview with ABC on Sunday.

 

The Georgia Senate runoff elections pose a near-term risk to equities, and an outcome in which both Democratic challengers emerge victoriously could spark a notable drop in the stock market, according to Oppenheimer strategist John Stoltzfus.

 

“A Democratic sweep of the two run-off elections in Georgia could cause the US equity broad market to experience a downdraft of anywhere between 6% and 10%,” Stoltzfus said in a note published Monday. “In our experience, the markets prefer that Washington’s Capitol Hill have enough checks and balances in place to keep political power out of just one party’s hands.”

 

“It is thought by not just a few folks on Main Street as well as on Wall Street that if tomorrow’s runoff results in a sweep for the Democrats – providing them with control of the Senate as well as the House that it would bode ill for business with the likelihood that corporate tax rates could rise substantially,” he said.

 

“Also, a Democratic sweep in Georgia would likely see a boost in new government program creation and spending at a time when many voters, market participants and business leaders are concerned about the sizable level of debt that the Treasury has had to take on to provide a financial ‘bridge over troubled water’ via fiscal stimulus,” he added.

 

Republicans currently control 50 seats in the Senate, while Democrats control 48. This means that a Democratic victory for both seats would give the party the majority in the chamber when including Vice President-elect Kamala Harris’s ability to cast tie-breaking votes.

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