Wednesday March 4th

4-03-2020

Dow set to jump 700 points as Biden scores big wins on Super Tuesday

U.S. stock index futures pointed to a sharply higher open on Wednesday as results on Super Tuesday showed former Vice President Joe Biden notching key wins and reassuring investors of his place amid the top candidates in the Democratic pool. As of 7:35 a.m. ET on Wednesday, Dow Jones Industrial Average futures were up 726 points and indicated a rise of 702 points at the open. S&P 500 and Nasdaq 100 futures also pointed to solid opening gains. Still, the implied open could change as markets remain volatile. Biden’s success early into Super Tuesday voting appeared to buoy U.S. equity futures as the former vice president notched a flurry of victories in key southern states including Virginia, North Carolina, and Arkansas. So far, NBC News projects Biden’s delegate total at 453, ahead of Vermont Sen. Bernie Sanders’ total of 373. To win the nomination, a Democratic candidate must receive support from a majority of pledged delegates — at least 1,991 of the total 3,979 pledged delegates. “We think the equity market has also been spooked by the decline in expectations that Trump will get reelected in the betting market, as well as Sanders’ early 2020 surge in the betting markets and the polls,” wrote RBC Capital Markets Head of Equity Strategy Lori Calvasina, referring to the market’s turbulence in recent weeks. Calvasina wrote that if Biden proves he can pose a serious threat to Sanders on Super Tuesday, industries that have come under pressure throughout the Vermont senator’s recent rise (e.g., health care) may see positive moves on Wednesday. “If Super Tuesday goes well for Biden, the areas with the most negative assessments may experience some relief. We think this is particularly true for Health Care, where performance has had a decent relationship with Biden’s odds in the betting markets for quite some time,” she wrote. Biden’s outperformance also appeared to boost stocks of health-care companies like UnitedHealth, one of the largest health insurers in the United States and whose equity is sometimes viewed as a bellwether during political debates around the industry. The stock rose more than 4% in extended trading Tuesday night. Investors have long applauded Biden for his middle-of-the-road tact in contrast to the more-progressive policies of Sens. Bernie Sanders and Elizabeth Warren. Some, such as Ritholtz Wealth Management CEO Josh Brown, wrote that investors may be as happy to see Biden leading as to see Warren trailing. Warren, a former law school professor who specialized in bankruptcy law, is not a favorite on Wall Street as she proposes detailed plans to break up big banks and technology companies and raise taxes. “Stocks will be even more relieved at Warren’s coming concession as they are at Biden’s big showing,” Brown tweeted. “Wall Streeters have always secretly been more afraid of her than anyone else given her domain expertise.” Tuesday’s session marked yet another volatile session for U.S. investors after the Federal Reserve announced an emergency interest rate cut in an effort to help pacify investors worried about the economic consequences of the coronavirus. The decision to cut rates by half a percentage point came two weeks before the Fed’s next scheduled meeting and reflected the central bank’s belief that quick action would be most effective to combat the dampening impact of the virus. The Fed’s extraordinary cut was the first such emergency action coming in between scheduled meetings since the financial crisis Though stocks initially traded higher, the Dow, S&P 500 and Nasdaq Composite all reversed course to end Tuesday’s session markedly lower. The Dow fell more than 780 points, or 2.9%, and the S&P 500 dropped 2.8% with both indexes back in correction. Investors, in turn, loaded up on U.S. Treasurys, pushing the benchmark 10-year yield below 1% for the first time ever. Gold, meanwhile, jumped 2.9% to settle at $1,644.40 per ounce. Bond yields fall as their prices rise. Stocks in Asia Pacific were mostly higher on Wednesday after the U.S. Federal Reserve announced an emergency rate cut on Tuesday. South Korea’s Kospi led gains among major Asian markets as it jumped 2.24% to close at 2,059.33. Mainland Chinese stocks were higher on the day. The Shanghai composite added 0.63% to about 3,011.67 while the Shenzhen component was fractionally higher at 11,493.02. The Shenzhen composite gained 0.361% to approximately 1,895.74. Hong Kong’s Hang Seng index edged 0.22% higher, as of its final hour of trading. That came after the latest release of IHS Markit’s Hong Kong Purchasing Manager’s Index, which hit a record low of 33.1 in February. In Japan, the Nikkei 225 closed fractionally higher at 21,100.06 while the Topix index ended its trading day 0.17% lower at 1,502.50. Brent oil prices rose on Wednesday on expectations that major producers have moved closer to an agreement to enact deeper output cuts aimed at offsetting the slump in demand caused by the coronavirus outbreak. Brent crude was up 97 cents, or 1.8%, to trade at $52.83 per barrel. U.S. West Texas Intermediate gained 82 cents, or 1.8%, to trade at $48.00 per barrel.