U.S. stock index futures fell slightly in premarket trading on Wednesday as the market wrestled for direction for a second day amid rising interest rates, political uncertainty, and a still-raging pandemic.
Futures contracts linked to the Dow Jones Industrial Average fell 28 points, or 0.1%. S&P 500 futures lost 0.2% and Nasdaq 100 futures lost 0.1%.
Stocks rose in the first week of 2021 but have stalled since then. The market closed on Tuesday little changed. The Dow Jones Industrial Average rose 60 points, or 0.2%, to 31,068.69. The Nasdaq Composite ended the day up 0.3% and the S&P 500 rose slightly to 3,801.19. In the meantime, the 10-year benchmark treasury’s return briefly stood at 1.18%, its highest level since March.
Given the rise in interest rates, Credit Suisse advised investors to favor procyclical sectors such as finance and energy. Rising interest rates could hurt growth stocks, however, and a number of tech heavyweights, including Facebook and Apple, fell during Tuesday’s session.
Investors will be watching the December CPI report, released at 8:30 a.m. on Wednesday, for evidence of rising inflation that could raise interest rates even further.
The expectation of additional fiscal stimulus is one of the reasons for the steady rise in returns. President-elect Joe Biden is expected to release details of his economic plan on Thursday.
“At least a $ 500 billion tax package consisting of additional economic reviews, expanded unemployment benefits, and funding for health care and vaccine payments will continue to fuel economic growth in 2021,” said Jason Draho, head of the Americas at UBS Global Wealth Management Asset Allocation.
After Tuesday’s subdued session, major averages remain lower for the week following Monday’s decline. The Nasdaq Composite is the relative underperformer, falling around 1% in the last two sessions. Small caps are a bright spot, however, and the Russell 2000 is up 1.7% so far this week.
The movements come as the turmoil in Washington continues. Vice President Mike Pence said Tuesday night he would not remove President Donald Trump from office. It did so before the Democratic House passed a resolution calling on Pence and the cabinet to push Trump out of the White House after instigating the Capitol uprising last week.
The House of Representatives plans to vote on Wednesday to indict Trump for the second time.
Covid cases continue to increase in the US and abroad as well. The U.S. has at least 248,650 new Covid-19 cases and at least 3,223 virus-related deaths each day, based on a seven-day average calculated by CNBC using data from Johns Hopkins University.
Still, many say the US is ready to grow again later this year.
“In 2021, the US economy should experience a strong tailwind from additional fiscal and monetary stimulus, combined with an end to the impact of the pandemic on the economy,” said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management. “Backlog in industries affected by COVID-19 … and the need to rebuild stocks should continue to fuel employment growth,” he added.
Taken together, Schutte said this creates the conditions for above-average economic growth and he sees stocks rise to new highs.
– CNBC’s Jacob Pramuk contributed to the coverage.
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