Monday August 10th

10-08-2020

S&P 500 futures are flat to start week as White House, Congress battle over coronavirus relief

U.S. stock index futures were flat early Monday morning after President Donald Trump signed several executive orders aimed at extending coronavirus relief. Dow Jones Industrial Average futures were up about 70 points, indicating a gain of around 60 points at market open. S&P 500 futures were little changed, while Nasdaq 100 futures fell 0.1%. Those orders continue the distribution of expanded unemployment benefits, defer student loan payments through 2020, extend a federal moratorium on evictions and provide a payroll tax holiday. However, the unemployment benefit will be continued at a reduced rate of $400 per week. Originally, the benefit provided workers impacted by the pandemic with $600 per week. Trump’s moves come after congressional leaders failed to make progress on a new coronavirus stimulus package last week. Several benefits from a package signed earlier in the year lapsed at the end of July, raising uncertainty about the U.S. economy moving forward. Still, Trump’s orders face a legal challenge as continuing the programs would require federal funding, which Congress controls. Democrats have insisted they will not support a bill that does not extend the $600 per week benefit. “The fiscal cliff still represents downside risk for August,” said Aneta Markowska, chief financial economist at Jefferies. Markowska added, however, any weakness from this will be “short-lived.” “By September, another round of fiscal support will create positive momentum. The reopening of schools, even if only in some states, will reinforce the positive momentum by (1) boosting back-to-school shopping and (2) allowing more parents to return to work in September,” she said in a note to clients. “Bottom line, all the stars are lining up for another inflection point in activity and a second leg up in the reopening.” Wall Street was coming off a strong weekly performance. The Dow rose 3.8% last week for its biggest weekly gain since June. The S&P 500 climbed 2.5% along with the Nasdaq Composite. Last week’s gains come during a historically tough time for the market as August kicks off the worst three-month stretch for the S&P 500. Those gains were led in part by Facebook, Apple and Microsoft, all of which rose by more than 3% last week. They also left the S&P 500 just 1.2% below its Feb. 19 record high. Asia Pacific markets traded mostly higher on Monday but investors remained cautious over heightened U.S.-China tensions in recent weeks. South Korea’s Kospi index gained 1.48% to 2,386.38 as shares of automakers surged. Chinese mainland markets reversed earlier losses to advance: The Shanghai composite rose 0.75% to 3,379.25, the Shenzhen component index was fractionally higher at 13,657.31 and the Shenzhen composite was up 0.2% to 2,277.42. In Hong Kong, the Hang Seng index retraced earlier losses of more than 1% to trade down 0.6%. The technology-focused Hang Seng Tech Index fell 2.89%. Markets in Japan are closed Monday for a public holiday. Oil prices climbed on Monday, supported by Saudi optimism on Asian demand and an Iraqi pledge to deepen supply cuts, although uncertainty over a deal to shore up the U.S. economic recovery capped gains. U.S. West Texas Intermediate (WTI) crude futures rose 50 cents, or 1.2%, to $41.72 a barrel at 0301 GMT, while Brent crude futures were up 40 cents, or 0.9%, at $44.80 a barrel. Gold prices edged lower on Monday and retreated sharply from a record peak in the last session, as the dollar made further gains with investors keeping a cautious eye on the U.S.-China spat ahead of key trade talks on Aug. 15. Spot gold fell 0.2% to $2,031.39 per ounce. U.S. gold futures rose 0.7% to $2,041.60 per ounce. Gold hit a record high of $2,072.50 on Friday but pulled back as much as 2.5%, hurt by a bounce in the dollar after data showed the U.S. economy added 1.763 million jobs in July.