Monday July 20th

20-07-2020

Stock futures slip as Wall Street struggles to extend last week’s gains

U.S. stock index futures declined early Monday, giving back earlier gains as investors tried to build on last week’s solid performance. Dow Jones Industrial Average futures pointed to a loss of about 50 points at the open. S&P 500 futures and Nasdaq-100 futures also traded lower. Last week, the S&P 500 and Dow rose 1.3% and 2.3%, respectively, for their third straight weekly advances. Those gains came as investors flocked into more beaten-up value names amid positive vaccine trial news from Moderna and a partnership between Pfizer and BioNTech. ViacomCBS — which is down about 40% for the year — gained nearly 10% last week. Gap jumped 10.6% in that time period and United Airlines rose 3.8%. The iShares Edge MSCI USA Value Factor ETF (VLUE) jumped 3.5% last week as well. But those advances came at the expense of major tech stocks such as Facebook, Amazon, Netflix, Alphabet and Microsoft. Facebook and Alphabet each lost more than 1% last week. Microsoft dropped 5.1% in that time period while Amazon and Netflix slid 7.4% and 10.2%, respectively. Those declines led to the Nasdaq Composite’s first weekly loss in three weeks. These stocks have been the stalwarts on Wall Street this year as investors bet these companies’ business models can keep them growing during the pandemic. “All the talk about a rotation out of technology and into more ‘value’ oriented areas, will grow in the coming weeks,” said Douglas Busch, founder of ChartSmarter, in a note. “if we lose technologies leadership in a meaningful way, I think it will adversely affect the overall market.” “If the sector can just take a rest, and keep in the middle of the pack akin to a smart jockey that has a lot of horse under him in a thoroughbred race, then it will likely see a surge again into the fall,” he added. The S&P 500 tech sector dropped 1.2% last week and was one of only two to decline by more than 1% in that time period. Facebook shares fell 1% in premarket trading following a Wall Street Journal report that Walt Disney, the social network’s top U.S. advertiser, was slashing ad spending. In other news, Chevron shares dropped 0.8% on news that the energy giant had confirmed its agreement to buy Noble Energy. The all-stock transaction is valued at $5 billion, or $10.38 a share. Noble shares jumped 8.8%. Traders also turned their eyes to Washington as lawmakers begin negotiations on new stimulus measures. Earlier this year, President Donald Trump signed a stimulus package worth roughly $2 trillion which expanded unemployment benefits for those laid off during the pandemic. Among these expanded benefits, a $600-a-week check was included. However, these extra payments are set to expire later this month. “There is a lot of uncertainty about the size and shape of the next bill, particularly on the consumer side,” said Aneta Markowska, chief financial economist at Jefferies, in a note. “We believe consensus expects a roughly $1-$1.5 package, so if the draft comes in on the high-end of that range, it would be seen as a positive surprise,” Markowska added. “In light of the deteriorating growth momentum, it is highly unlikely that Republicans under-deliver, which means that risks are skewed to the high side.” Coronavirus cases have been rising at an alarming rate. Multiple companies are in the race for a vaccine and therapeutics. British pharmaceutical company Synairgen has claimed that its new respiratory coronavirus treatment has reduced the number of hospitalized Covid-19 patients needing intensive care in a clinical trial. Its shares rose more than 350% on the European market. Mainland Chinese stocks surged on Monday, as China maintained its benchmark lending rate for the third straight month. The Shanghai composite jumped 3.11% to close at 3,314.15 while the Shenzhen composite was up 2.68% to close at 2,216.70. The Shenzhen component jumped 2.55% to 13,448.85. Over in Hong Kong, the Hang Seng index lost 0.38% in the afternoon. Japan’s Nikkei 225 clawed back earlier losses to edge up 0.09%, closing at 22,717.48. The Topix rose 0.20% to close at 1,577.03. Over in South Korea, the Kospi slipped 0.14% to close at 2,198.20. Oil prices fell on Monday, unnerved by the prospect that a recovery in fuel demand could be derailed by a rise in the pace of coronavirus infections around the world. Brent crude was down 34 cents, or 0.8%, at $42.80 a barrel, after dropping slightly last week. U.S. oil was off by 34 cents, or 0.84%, at $40.25 a barrel, after gaining 4 cents last week. Gold prices edged higher on Monday as rising numbers of coronavirus cases around the world raised concerns over the pace of economic recovery, while investors awaited the European Union’s decision on a proposed recovery fund. Spot gold rose 0.3% to $1,814.38 per ounce, while U.S. gold futures were also 0.3% higher at $1,815.70.