U.S. futures higher as stocks set to rise further

by Jonathan Adams
stocks

Dow futures added 250 points, while S&P 500 contracts gained 27 points, and Nasdaq 100 futures advanced 95 points

Futures contracts tied to the major U.S. stock indexes were higher in extended trading Monday evening after ending strong previous week.

Dow futures added 250 points, while S&P 500 contracts gained 27 points, or 0.7%. Nasdaq 100 futures advanced 95 points, or 0.7%.

The U.S. stock market was shut on Monday on account of Presidents Day.

Strategists cited a drop in the Cboe Volatility Index as the reason behind the recent optimism in the markets.

Fundstrat founder Tom Lee said the VIX’s drop below 20 means investors have grown more comfortable in the near term.

Fear is receding from the market, Lee, a CNBC contributor, wrote of the move on Friday. And receding fear is followed by systematic and quant funds adding ‘leverage’ — in other words, this is a set-up to see a rally.

Even as February’s rally appeared to recede somewhat, the major averages ended the last week with decent gains. The blue-chip Dow Jones Industrial Average was little changed on two days, while the S&P 500 was within 0.2% for three days in a row.

Still, the S&P 500 gained 1.2% to round off the week, while the Dow advanced 1%. The Nasdaq Composite added 1.7%. All the three indices ended at record levels on Friday.

The rollout of the Covid-19 vaccine, economic reopening and expectations for more stimulus are the likely reasons which eased fears across the Wall Street.

Covid is far from defeated, but the path toward economic normalization is clearer as more vaccines that reduce hospitalizations and eliminate fatalities are approved, Dennis DeBusschere, strategist at Evercore ISI, said in an email.

Treasury Secretary [Janet] Yellen’s forceful arguments for additional stimulus followed by Fed Chair [Jerome] Powell describing maximum employment as ‘our national goal’ helped lift bond yields, inflation expectations, and oil prices last week, he added.

The Dow has added 4.9% in February, while the S&P 500 and the Nasdaq have surged 5.9% and 7.8%, respectively. The S&P 500 achieved ten record closes in 2021.

Still, DeBusschere warned that rising interest rates and an uncertain policy outlook could keep trading from growing too frothy in the near term and recommended investors stick to cyclical stocks that could see the most upside as the U.S. economy recovers.

The rally in February was led by sectors most sensitive to an economic rebound. Energy rose more than 13% month to date, along with financials and materials.

Another rally in energy futures on Monday was sparked off by freezing weather condition across the U.S. which put West Texas Intermediate crude contracts above $60 a barrel for the first time since the early days of the coronavirus pandemic.



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