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U.S. stock benchmarks opened modestly higher Wednesday, one day after a four-session win streak was brought to a halt amid concerns about coronavirus treatments and vaccines.
Investors have been parsing corporate earnings from prominent banks to assess the impact of COVID-19 on businesses.
The U.S. economic calendar on the day is light, with the only reading, the producer price index, showing inflation slightly hotter than analysts had expected.
How are stock benchmarks performing?
The Dow Jones Industrial Average DJIA, +0.32% gained 11 points, to trade near 28,691, while the S&P 500 SPX, +0.33% index was up 3 points, 0.1%, at 3,515. The Nasdaq Composite COMP, +0.31% added 25 points, 0.2% , at 11,188.
What’s driving the market?
Wednesday marked the second full day of corporate quarterly earnings from the likes of Bank of America BAC, -2.70%, Goldman Sachs GS, +0.31% and Wells Fargo WFC, -3.07% for signs of the health of the U.S. economy, coming a day after JPMorgan Chase JPM, +0.22% and Citigroup C, +0.19% posted better-than-expected results, while warning that the economy has a long road ahead to recover from the worst pandemic in more than a century.
Bank of America reported $20.45 billion in total revenue, missing the $20.8 billion estimate of analysts surveyed by Refinitv, while income was at $4.9 billion, or 51 cents a share, from $5.8 billion, or 56 cents a share, in the year-ago period, but above the FactSet consensus of 49 cents a share.
Meanwhile, Goldman reported better-than-expected earnings and revenue that helped to boost the investment bank’s shares in premarket trade. The bank reported earnings per share of $9.68 per share, compared with $5.57 expected by Refinitiv’s consensus estimates, while revenue came in at $10.78 billion, versus consensus estimates for $9.46 billion.
Beyond the earnings, concerns about the global spread of coronavirus in the autumn and winter in the northern hemisphere were rising.
The Wall Street Journal reported that U.S. hospitalizations are at their highest level since Aug. 29, citing data from the COVID Tracking Project. Jitters about out-of-control infections come after two drug trials were halted within about 24 hours, as Eli Lilly LLY, +0.16% said that it paused an antibody treatment for the illness created by the novel strain of coronavirus, a day after Johnson & Johnson JNJ, -0.22% said that it temporarily halted a vaccine trial.
Although such pauses in experimental drug trials are common, the white-hot focus on finding a remedy and treatments for the disease that has stricken some 38 million people globally has amplified anxieties.
Wall Street is also closely watching the prospect of additional fiscal stimulus from Congress to help businesses and households deeply wounded by the economic fallout of measures to limit the spread of COVID-19.
Questions about stimulus dwarf everything else for market participants, even vaccines and earnings, said Mohannad Aama, portfolio manager at New York-based Beam Capital Management. “I think there is an expectation that something will happen before the election. Absent that, there would be a market disappointment.”
Aama expects to continue to see a bifurcation among companies reporting earnings: those exposed to the consumer sectors most impacted by worldwide lockdowns will be hurt, while those at a remove will do fine. “The big consumer banks warned that loans and credit cards might be under pressure but anything related to investment and trading is doing great,” he said in an interview.
“Right now, there’s a lot of fear of missing out,” Aama said. “Investors can not afford to be out of the market.” In October, he noted, there was an interesting “barbell”-like pattern among sectors of the S&P 500: technology XLK, +0.36% has been the best performer, followed by utilities XLU, +0.37%. “Investors are trying to hedge.”
All of these factors come amid as the 2020 presidential election draws near. The contest between Democratic challenger and former Vice President Joe Biden and incumbent Donald Trump could inject more volatility into the market. The political race may also be undermining lawmakers’ will to do more on stimulus, analysts say.
However, growing expectations that a decisive Democratic victory in the presidential race and in Congress, or a so-called “blue wave”, will result from the elections, has fostered some hope for more significant and broader array of economic stimulus.
“Sentiment was knocked on Tuesday when stimulus talks once again stalled in Washington, with the two sides seemingly no closer to an agreement on much needed support,” wrote Craig Erlam, senior market analyst at Oanda, in a note.
“There hasn’t been great news this week on the Covid fight either, with more restrictions being imposed across Europe, J&J pausing its vaccine trials after a participant fell ill and Eli Lilly halting clinical trials of its antibody treatment over a safety concern,” the analyst wrote.
Meanwhile, market participants are keeping one eye on talks between Britain and Europe to execute an orderly exit from the European Union, with self-imposed deadline of Thursday looming.
“Wire reports this morning indicate EU leaders will say at a two-day summit on Thursday-Friday, that not enough progress has been made for a deal to be reached and that they will step up no-deal preparations,” said Neil Wilson, chief market analyst for Markets.com.
Which stocks are in focus?
- ConocoPhillip COP, +1.72% is in talks to buy Concho Resources CXO, +12.00%, Bloomberg News reported, citing people familiar with the matter.
- Shares of UnitedHealth Group Inc. UNH, -0.48% rose 0.9% in premarket trading Wednesday, after the health-care company reported third-quarter profit and revenue that beat expectations and raised its full-year outlook.
- Shares of NIO Inc. ADR NIO, +18.06% spiked after a price-target upgrade.
What are other assets doing?
The yield on the 10-year Treasury note TMUBMUSD10Y, 0.727% dipped 1.2 basis points to 0.72%. Yields and bond prices move in opposite directions.
In global equities, Hong Kong’s Hang Seng Index HSI, +0.07% and Japan’s Nikkei 225 NIK, +0.10% both closed 0.1% higher. The pan-European Stoxx 600 Europe SXXP, +0.10% and London’s FTSE 100 UKX, -0.29% were both down 0.2%.
Gold GCZ20, +1.06% gained 0.9% to rise to $1,911.90, one day after sinking below the $1,900 threshold. Oil futures jumped, pushing the U.S. benchmark CL.1, +2.09% up 1%, to $40.59 a barrel, even as rising coronavirus case counts put demand in question.
The greenback was 0.2% lower at 93.33, based on the ICE U.S. Dollar Index DXY, -0.23%.
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