Stock futures drifted higher Tuesday evening as investors considered the first presidential debate and continued to eye developments among congressional lawmakers for further fiscal stimulus.
A key labor market report is also due out Wednesday morning, along with a couple highly anticipated direct listings for tech companies Asana and Palantir.
The three major indices closed out Tuesday’s session lower, giving back some of Monday’s strong advances as September’s wave of selling retook markets. As of Tuesday’s close, the S&P 500 was on track to post a 4.7% monthly decline – its worst since March.
Only the materials sector has clung to gains in the blue-chip index for September to date. The energy, communication services and information technology sectors were the laggards, as a month-long correction in previously high-flying tech names took out these sectors’ leadership positions. The utilities and industrials sectors were on track to post losses for the month as well, but still outperformed the broader market.
With five weeks to go until Election Day, market pundits have warned of a potential for additional volatility conjured up by political uncertainty, compounded with ongoing concerns over the coronavirus pandemic and strain still facing the US economy.
“I think markets are really nervous into those 36 days [before the election] and one of the things we have to think about is, when does nervousness price in the worst is yet to come? When do you think the worst is priced in? At least from June to August highs, if you give up two-thirds of those gains … that would be 3,224 [on the S&P 500],” Tom Lee, Fundstrat Global Advisors managing partner and head of research, told Yahoo Finance. “We think that that’s when you start to price in the worst, because you’ve given up two-thirds of the rally that you’ve had since June, and I think the world is better than it was since June.”
Despite the pullback, Lee added he does not believe stocks are ultimately in a “down trend.”
“There’s still $4.3 trillion in cash on the sidelines. I don’t think in the history of any financial market in the world do you ever have a top when there’s 20% of the equity market sitting in cash,” he said. “Investor cash — that’s excluding the private equity cash, the record cash held by corporates too. So you’ve got tons of dry powder. People are bearish.”
On the economic data front, both ADP’s private payrolls report out Wednesday morning and the Department of Labor’s September jobs report out Friday – each the last before the election – are expected to show fewer than 1 million jobs added back in September, as the pace of the economic recovery sputters.
To that end, congressional lawmakers and Trump administration negotiators have been attempting to come to a deal to pass in the near-term another virus relief bill. House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin on Tuesday discussed the $2.2 trillion Democratic stimulus proposal, according to a Bloomberg report, and are poised to hold further talks again on Wednesday. Still, most economists and policy pundits are bracing for no new stimulus legislation to pass before the general election.
9:50 p.m. ET Tuesday: Futures push higher with first presidential debate under way
Contracts on the three major indices were higher Tuesday evening as the first presidential debate between President Donald Trump and former Vice President Joe Biden was under way. In the first about 45 minutes of the debate, the discussion, moderated by Fox News anchor Chris Wallace, covered topics including the Supreme Court, and whether Trump’s pick Judge Amy Coney Barrett should be moved to be confirmed before the election, the handling of the Covid-19 pandemic, the candidates’ health-care plans and the labor market.
Here’s where futures were trading, as of 9:50 p.m. ET:
S&P 500 futures (ES=F): 3,344.75, up 11 points or 0.33%
Dow futures (YM=F): 27,493.00, up 85 points or 0.31%
Nasdaq futures (NQ=F): 11,368.5, up 30.75 points or 0.27%
6:11 p.m. ET Tuesday: Stock futures open lower
Here were the main moves in equity markets, as of 6:11 p.m. ET Tuesday:
S&P 500 futures (ES=F): 3,332.00, down 1.75 points or 0.05%
Dow futures (YM=F): 27,389.00, down 19 points or 0.07%
Nasdaq futures (NQ=F): 11,332.00, down 5.75 points or 0.05%