Contracts on the Dow gained more than 50 points, Nasdaq futures ticked higher
Stock futures opened slightly higher Tuesday evening after a mixed session earlier in the day.
Contracts on the Dow added more than 50 points, or 0.2%, as the overnight session kicked off. Nasdaq futures ticked higher, steadying after the index dropped more than 1% earlier in the day.
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 “epicentre 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 travelling – helped catalyze the rally.
The jump, however, has come 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. In a note published Monday, JPMorgan equity strategists said they expected the S&P 500 to surpass their 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.
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