Inventory futures climb as tech shares get well some losses

Stock futures rose Wednesday as tech shares looked to make up some of their declines from earlier this week.

Contracts on the Dow added more than 200 points, or 0.7%, with about two hours to go until the opening bell. Nasdaq futures outperformed, adding 0.9% and steadying after the index dropped more than 1% in each of the previous two sessions.

Traders this week have so far embraced many of the stocks hardest-hit by the pandemic, including the airline, cruise line, lodging, restaurant and brick-and-mortar companies some analysts have called the “epicenter stocks.” Hopes that drug-makers were closing in on getting approval for a vaccine – and by extension, helping to stoke consumer confidence in getting out and traveling – helped catalyze the rally.

The jump, however, came at the expense of the growth and tech stocks that led the markets higher earlier on during the pandemic. The Nasdaq posted back-to-back sessions of declines greater than 1%, while the Dow brought its cumulative advance for the week-to-date to nearly 4%. In the S&P 500, the energy, financials and industrial sectors have far outperformed over the past two sessions, after lagging for the year-to-date.

“Overall I look at this as somewhat of a catch-up positioning from investors,” Michael Arone, State Street Global Advisors chief investment strategist, told Yahoo Finance. “Investors have gotten a lot more comfortable with the election outcome, with progress on COVID-19 solutions, and what again was a very solid earnings season. So I think they’re looking ahead to 2021 and anticipating, perhaps, much better-than-expected economic growth and earnings growth. And so they’re pivoting towards more cyclical, value companies and a bit away from the technology.”

“This recalibration, in my opinion, is healthy,” he added. “Remember we were all scratching our heads over how concentrated the market was, how it was just a handful of tech names. Now we’re seeing much greater breadth in this rally, and I think that’s healthy for the overall market.”

Other analysts shared this view, and a number of strategists this week upgraded their near-term expectations for the path forward in equity markets. Goldman Sachs equity strategists lifted their year-end S&P 500 price target to 3,700 from 3,600, and said they expected the S&P 500 to then climb to 4,300 by the end of 2021.

“The market is actually less dependent on the performance of a few mega-cap stocks than many investors perceive,” the strategists led by David Kostin wrote in a note published Wednesday.

And in a note published Monday, JPMorgan equity strategists said they anticipated the S&P 500 would surpass their own previous price target of 3,600 by year-end and touch 4,000 by early next year, with the potential to then rise further to 4,500 by the end of 2021.

“The equity market is facing one of the best backdrops for sustained gains in years,” the strategists wrote. “After a prolonged period of elevated risks (global trade war, COVID-19 pandemic, US election uncertainty, etc.), the outlook is significantly clearing up.”

7:21 a.m. ET: Stock futures climb as tech stocks recover losses

Here were the main moves in markets as of 7:21 a.m. ET:

  • S&P 500 (^GSPC): +25.5 points (+0.72%) to 3,566.50

  • Dow (^DJI): +189.00 points (+0.64%) to 29,508.00

  • Nasdaq (^IXIC): +103.5 points (+0.89%) to 11,721.75

  • Crude (CL=F): +$1.05 (+2.54%) to $42.41 a barrel

  • Gold (GC=F): -$0.40 (-0.02%) to $1,876.00 per ounce

  • 10-year Treasury (^TNX): +0.2 bps to yield 0.96%

7:00 a.m. ET Wednesday: Mortgage applications fell for the first time in three weeks as purchases slide further

The Mortgage Bankers Association’s weekly market composite index tracking applications for home purchases and refinances fell by 0.5% during the week ending Nov. 6, following a 3.8% weekly jump during the prior period.

While refinances rose 1% week-over-week, purchases declined by 3% on a seasonally adjusted basis during the week. This marked the sixth drop in the purchases index in seven weeks, bringing it down to the lowest level since May. Still, on an unadjusted basis, purchase volume remained 16% higher than the comparable week last year.

“Mortgage application activity was mixed last week, despite the 30-year fixed rate decreasing to 2.98% – an all-time MBA survey low. The refinance index climbed to its highest level since August, led by a 1.5% increase in conventional refinances,” Joel Kan, MBA’s associate vice president of economic and industry forecasting, said in a statement.

“Homebuyer demand is still strong overall, and activity was up 16.5% from a year ago. However, inadequate housing supply is putting upward pressure on home prices and is impacting affordability – especially for first-time buyers and lower-income buyers,” he added. “The trend in larger average loan application sizes and growth in loan amounts points to the continued rise in home prices, as well as the strength in the upper end of the market.”

6:14 p.m. ET Tuesday: Stock futures slightly higher

Here were the main moves in markets, as of 6:14 p.m. ET Tuesday evening:

  • S&P 500 futures (ES=F): 3,549.75, up 8.75 points or 0.25%

  • Dow futures (YM=F): 28,388.00, up 69 points or 0.24%

  • Nasdaq futures (NQ=F): 11,649.00, up 30.75 points or 0.26%

A trader exits the New York Stock Exchange (NYSE) on Election Day in Manhattan, New York City, New York, U.S., November 3, 2020. REUTERS/Andrew Kelly
A trader exits the New York Stock Exchange (NYSE) on Election Day in Manhattan, New York City, New York, U.S., November 3, 2020. REUTERS/Andrew Kelly

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