Stock-index futures traded mostly higher Monday after President Donald Trump over the weekend signed executive orders that would extend some elements of coronavirus relief.
The measures face likely legal hurdles and questions about their effectiveness, however, while continued U.S.-China tensions might also cap upside for the market, analysts said.
What are major benchmarks doing?
Futures on the Dow Jones Industrial Average YM00, +0.34% rose 87 points, or 0.3%, to 27,420, while S&P 500 futures ES00, +0.06% rose 1.45 points, or less than 0.1%, to 3,346.25. Nasdaq-100 futures NQ00, +0.02% were off 6.25 points, or 0.1%, at 11,116.50.
Stocks scored gains last week, with the Dow DJIA, +0.17% advancing 3.80% to 27,433.48, and the S&P 500 SPX, +0.06% posting a weekly rise of 2.5% to 3,351.28, The Nasdaq COMP, -0.87% gained 2.5% to finish at 11,010.98. The Nasdaq edged lower on Friday after hitting a series of record finishes that propelled it above the 11,000 milestone. The S&P 500 on Friday finished just 1% away from its Feb. 19 closing record of 3,386.15, while the Dow closed 7.2% below its record finish set on Feb. 12.
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What’s driving the market?
After the White House and Democratic lawmakers failed last week to come to an agreement on a new round of coronavirus aid, Trump on Saturday signed executive orders to pause the collection of payroll taxes, provide help on rent, assist with student-loan payments and extend a portion of additional unemployment benefits that had lapsed at the end of last month. The measures are almost certain to face legal challenges and logistical hurdles.
The order authorizes states to pay $400 a week in additional unemployment benefits, with 75% of the funding coming from the federal government, versus the $600 in additional benefits that had expired at the end of July.
See:States would be on the hook for billions under Trump’s jobless-benefits plan
“Obviously this is less stimulus than was previously available, which was probably already not enough to stop the economy from slowing — regardless of the good U.S. employment news on Thursday and Friday — and kicks the can at best. However, it is mathematically better than nothing,” said Michael Every, global strategist at Rabobank, in a note.
Meanwhile, U.S.-China tensions intensified, with Beijing on Monday announcing unspecified sanctions against 11 U.S. politicians and heads of organizations promoting democratic causes, including additional measures targeting Senators Marco Rubio and Ted Cruz, who were already subject to a travel ban.
Also, Chinese jet fighters briefly crossed the midline of the Taiwan Strait on Monday, news reports said, as U.S. Health and Human Services Secretary Alex Azar visited the island.
Earnings season will begin to wind down this week. Through Friday, companies representing 89% of the S&P 500’s market cap had reported second-quarter results, according to Jonathan Golub, chief U.S. equity strategist at Credit Suisse Securities. In aggregate, 81% of the companies that have reported beat lowered projections.
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Earnings have exceeded estimates by 23.2% in aggregate, with 81% of the reported companies beating their lowered projections. He noted that while second-quarter earnings per share have surpassed projections by over 23%, consensus 3Q estimates have only been raised by 3%, and fourth-quarter estimates remain unchanged.
Data on job openings for June is due at 10 a.m. on an otherwise light economic calendar.
Which companies are in focus?
- Shares of social media platform Twitter Inc. TWTR, -1.45% rose 4% in premarket activity after The Wall Street Journal reported it had held preliminary talks about a potential combination with TikTok, the video-sharing app that the Trump administration has declared a national-security threat due to its Chinese ownership. Microsoft Corp. MSFT, -1.78%, however, is still seen as the front-runner in any deal with TikTok after weeks of talks between it and TikTok’s owner, Beijing-based ByteDance Ltd., the report said.
- Shares of Berkshire Hathaway Inc. BRK.A, +2.23% BRK.B, +2.17% were expected to be in focus after the conglomerate ran by billionaire investor Warren Buffett on Saturday reported an 87% jump in second-quarter profit thanks to the rising value of its investment portfolio, though it also took a write-down of around $10 billion on the value of its aircraft parts manufacturing business.
- Marriott International Inc. MAR, +3.75% shares fell in premarket trading after the hotel operator reported a wider-than-expected second-quarter loss and revenues that came in below Wall Street estimates.
How are other markets trading?
The 10-year Treasury note yield TMUBMUSD10Y, 0.555% rose 1.3 basis points to 0.575%. Bond prices move inversely to yields.
The greenback was 0.2% higher, with the ICE U.S. Dollar index DXY, +0.17%, a gauge of the buck against a half-dozen currencies, at 93.644 early Monday.
In Europe, the Stoxx Europe 600 index SXXP, +0.28% traded 0.3% higher, after booking a 2% gain last week, and the FTSE 100 UKX, +0.47% rose 0.4%, following its 2.3% weekly advance.
In Asia, China’s CSI 300 index 000300, +0.36% ended trade up 0.4%, while Hong Kong’s Hang Seng Index HSI, -0.62% closed off 0.6%.
U.S. benchmark CL.1, +1.26% oil traded 56 cents, or 1.4%, higher to $41.78 a barrel on the New York Mercantile Exchange. Gold futures for December GCZ20, +0.57% added $12.50, or 0.6%, to trade at $2,040.50 an ounce.
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