Stock futures pointed to a pullback at the open Wednesday following Tuesday’s historic rally in anticipation of a coronavirus stimulus deal by Congress. The White House and Senate reached an agreement overnight.
Around 8:19 a.m. ET, futures on the Dow Jones Industrial Average were flat after briefly falling more than 200 points. S&P 500 and Nasdaq 100 futures were down 0.8% and 0.9%, respectively.
The action in the futures market followed an epic comeback on Wall Street. The Dow soared more than 2,100 points, or over 11%, notching its biggest one-day percentage gain since 1933 and its best point increase ever. The S&P 500 rallied 9.4% for its best day since October 2008.
White House and Senate leaders agreed to a massive $2 trillion coronavirus stimulus bill in the middle of the night.
“At last we have a deal,” Republican Senate Majority Leader Mitch McConnell said around 1:37 a.m. ET from the floor of the Senate. “In effect, this is a war-time level of investment into our nation.”
Democratic Senate Minority Leader Chuck Schumer said, “This is not a moment of celebration but one of necessity.”
Despite the stimulus, some investors think the number of global coronavirus cases needs to improve before the market can form a bottom.
Futures fell following a record spike in coronavirus deaths in Spain, with 504 reported just for Tuesday. Globally, more than 400,000 cases have been confirmed, according to data from Johns Hopkins University. In the U.S., more than 55,000 cases have been confirmed along with over 69,000 in Italy.
Peter Oppenheimer, chief global equity strategist at Goldman Sachs, said there are four “components” to the market stabilizing from here:
“(i) A sign that the policy intervention is sufficient to prevent severe second- and third-round economic shocks; (ii) A sign that the infection rate is reaching a peak; (iii) A sign that the economic downturn may be slowing; and (iv) Cheap valuations,” Oppenheimer wrote in a note to clients. “In reality, we believe it will be a combination of these, and in some cases there are already signs these are in place.”
Even with Tuesday’s massive rebound, some on Wall Street struggle to see the light at the end of the tunnel, especially without a clear sign that the coronavirus outbreak will be contained soon.
“This was a one-day bull market,” CNBC’s Jim Cramer said on “Closing Bell” on Tuesday. “You had stocks that moved so much they basically moved as if the second half of the year is going to be good. I struggle to find out why the second half of the year should be good …I hate this kind of rally. This was a machine-driven rally, just like the sell-offs … I want to wait to see.”
Last week, the Cboe Volatility Index (VIX), also known as Wall Street’s fear gauge, eclipsed its financial crisis high and closed at 82.69. As of Wednesday morning, it was still hovering around a still-high 60 level.
Some investors believed the stock market was overdue for a big bounce, having priced in a worst-case scenario regarding the economic damage being done by coronavirus-related shutdowns. They believe a bounce could occur here even as coronavirus cases continue to surge because the market was so oversold.
—CNBC’s Jesse Pound contributed reporting.
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