Dow, S&P 500 set to kick off August trade higher as tech stocks resume rally, but stalled coronavirus stimulus talks in focus

Dow, S&P 500 set to kick off August trade higher as tech stocks resume rally, but stalled coronavirus stimulus talks in focus


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U.S. stock-index futures on Monday traded modestly higher after wavering in early action in the first trading day in August, with wrangling in Washington over another round of coronavirus stimulus supporting some appetite for large-capitalization technology stocks that have been viewed as more resilient to the economic effects of the COVID-19 pandemic.


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How are equity benchmarks performing?

Futures for the Dow Jones Industrial Average (YMU20)(YM00) were up 100 points, or 0.4%, at 26,416; while S&P 500 futures (ESU20)(ES00) were 16.50 points, or 0.5%, higher at 3,280. Nasdaq-100 futures (NQU20)(NQ00) were up 100 points, or 0.9%, at 10,990.50.

On Friday, the Dow (DJIA) put in a weekly loss of 0.2%, while the S&P 500 (SPX) gained 1.7% and the Nasdaq Composite Index (COMP) surged 3.7% over the period. In July, the indexes booked a fourth straight monthly gain, with the Dow gaining 2.4%, the S&P 500 advancing 5.5% and the Nasdaq rallying 6.8% for the month.

What’s driving the market?

Market participants are focused on the fact that there are no signs of a stimulus package between Democrats and Republicans after negotiations over the weekend failed to yield a replacement for a $600-a-week boost to unemployment benefits that expired Friday.

House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin revealed clear fault lines in negotiations between the parties during Sunday talk shows. Pelosi said that “we’ll be close to an agreement when we have…an agreement,” speaking to ABC’s Martha Raddatz on “This Week.”

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At issue for Democrats and Republicans is the amount of unemployment assistance for Americans. The White House has come out in favor of reducing the federal assistance to $200 a week, Democrats have called for keeping it at $600 a week. However, the parties appear to both support a fresh round of stimulus checks of $1,200 for workers.

The fight for aid for out-of-work Americans comes ahead of Friday’s July report on the labor market that will be pored over to determine the impact of the deadly pathogen on employment as cases of the infection have steadily risen in a number of states.

Indeed, coronavirus infections in the U.S. reached a record in July, with more than 1.9 million new cases. The U.S. has nearly 4.7 million confirmed COVID-19 cases and about 155,000 deaths, while the global tally for infections stands at more than 18 million and almost 690,000 deaths, according to data compiled by Johns Hopkins University.

Meanwhile, investors may focus on developments between Microsoft Corp. (MSFT) and video-sharing app TikTok, owned by a Chinese company, ByteDance. Microsoft confirmed talks to buy the American unit of the company and Microsoft CEO Satya Nadella said he spoke with President Donald Trump. Trump on Friday had signaled that he was considering a ban of the popular app.

Secretary of State Mike Pompeo over the weekend said that the White House may take action against other Chinese software companies, highlighting elevated tensions between Beijing and Washington.

Looking ahead, investors awaited a report on manufacturing activity for July from the Institute for Supply Management releases due at 10 a.m. ET., as well as a report on construction spending for June. A separate, less closely followed report on manufacturing from IHS Markit will be released at 9:45 a.m.

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On the Federal Reserve front, St. Louis Fed President James Bullard is expected to speak at 12:30 p.m., while Charles Evans, Chicago Fed president, is slated to speak at 2 p.m.

Which stocks are in focus?

  • Shares of Clorox Co. (CLX) rose in premarket trading Monday, after the maker of cleaning and household products reported a fiscal fourth-quarter profit and revenue that beat expectations, as it benefited from demand for cleaning products as a result of the COVID-19 pandemic, while providing an in-line outlook.
  • Microsoft (MSFT) shares rallied 2% premarket Monday after confirming on Sunday that it is holding talks with China-based ByteDance to buy the U.S. operations of its TikTok unit.
  • Marathon Petroleum Corp. (MPC) fresh from the sale of its gas stations to the owners of the 7-Eleven convenience store chain for $21 billion in the largest U.S. energy deal of the year, posted second-quarter earnings Monday, showing a smaller-than-expected adjusted loss but revenue that lagged estimates.
  • Shares of residential and commercial security provider ADT Inc. (ADT) soared in premarket trade Monday, after the company announced a new venture with Alphabet Inc.’s (GOOG)(GOOGL) Google to create the next generation of smart home security offerings.
  • Apple Inx. (AAPL) has purchased an online payments startup that could turn the iPhone into a payment terminal, much as Square (SQ) does, according to a report. Apple has bought Montreal’s Mobeewave for about $100 million, according to Bloomberg News.

Video: Nasdaq surges on megacap earnings but U.S. fiscal uncertainty nags (Reuters)

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