The Wednesday Market Minute
- Global stocks extend gains on vaccine hopes, taking bond and gold prices lower as investor rotate into beaten-down value stocks.
- European stocks hit the highest levels since February, while Japan’s Nikkei 225 closes as a fresh 29-year high and just over the 25,000 point mark.
- Benchmark 10-year Treasury note yields test 1%, while gold extends post-election decline to trade at $1,876.70 per ounce.
- Surging U.S. COVID infections, as well as rising doubt over a smooth transition of power as President Donald Trump refuses to accept his election defeat, remain underlying market risks.
- Wall Street is looking at a firmer open Wednesday, with the Dow within touching distance of its all-time closing high, heading into a light session where bond markets will remain closed for the Veterans’ Day observance.
U.S. equity futures powered higher again Wednesday, while oil prices extended their recent rally and bond priced slumped, as global investors continued their rotation into beaten-down value stocks and riskier market plays following Pfizer Inc. (PFE) – Get Report coronavirus vaccine breakthrough earlier this week.
With the S&P 500 more than 4.3% higher since last week’s Presidential election, and the Dow Jones Industrial Average within touching distance of the 30,000 point barrier, stock market gains show little sign of easing this week as option traders position themselves for more upside moves and safe-have assets such as gold and bonds continue to tumble.
Oil prices, too, have surged higher this week as energy, travel and leisure stocks soared following Monday’s revelation from Pfizer, which indicated that its developing coronavirus vaccine is more than 90% effective in terms of protecting people from contracting the disease.
Both WTI and Brent crude have gain more than 13% this week, and were surging higher again Wednesday on extended bets that a near-term vaccine could bring some level of normalcy to travel markets — and, by extension, energy demand — around the world.
Underlying risks are still embedded in most markets, however, given the a broader roll-out of the Pfizer vaccine isn’t likely until the spring, according to Health and Human Services director Alex Azar, and new COIVD infections are rising at a rate of 100,000 per day in the United States, with hospitalizations at record highs in various states around the country.
At the same time, President Donald Trump’s reluctance to concede his defeat to President Elect Joe Biden — alongside troubling comments from senior administration officials and the barrage of lawsuits filed on behalf of the Trump campaign — could mean the peaceful transition of power markets have priced in since last week’s election is premature.
Still, overnight trading in markets around the world, as well as early indications from U.S. equity futures, suggest Wall Street is ready to test recent and all-time highs at the opening bell, with contracts tied to the Dow indicating a 200 point gain and those linked to the S&P 500 pricing in a 26 advance.
Futures contracts tied to the Nasdaq Composite index, meanwhile, are indicating the first day of gains this week for the tech-focused benchmark and a 120 point opening bell advance.
Benchmark 10-year Treasury note yields held at 0.96% in overnight trading, but are unlikely to test 1% today as bond markets in the U.S. will remain closed for the Veterans’ Day observance. The U.S. dollar index, meanwhile, edged 0.15% higher to 92.884 against a basket of its global currency peers.
WTI crude futures contracts for December delivery, the U.S. benchmark, traded $1.44 higher from their Tuesday close in New York, boosted by data from the American Petroleum Institute that indicated a 5.1 million barrel decline in domestic stockpiles, and were changing hands at $42.80 per barrel in early European dealing.
Brent contracts for January delivery, the 45.06 per barrel.
European stocks were also on the rise, with the Stoxx 600 gaining 0.63% to lift the broadest measure of regional share prices to the highest levels since February, lead by gains for healthcare, energy, household goods and real estate stocks.
Overnight in Asia, Japan’s Nikkei 225 hit a fresh 29-year high of 25349.60 points following a 1.78% gain in Tokyo amid a similar rotation out of tech stocks into value plays such as bank, travel and insurance stocks.
The region-wide MSCI ex-Japan index, meanwhile, was last seen 0.16% higher at 608.65 points heading into the final hours of trading.