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DJ S&P 500 on Track for Best Week Since Early November

· 02/05/2021 05:19
By Caitlin Ostroff

U.S. stock futures edged higher Friday, suggesting the S&P 500 is poised for its best week in three months, on investors' bets that a fresh coronavirus-relief spending package will bolster the economy.

Futures tied to the S&P 500 ticked up 0.2%, indicating that the broad market gauge may continue to rise after closing at a record high on Thursday. The benchmark is up over 4% this week, on track for its biggest one-week gain since the week ending Nov. 6.

Contracts linked to the technology-heavy Nasdaq-100 advanced 0.4%, and those tied to the Dow Jones Industrial Average edged 0.2% higher.

The market has rallied this week as President Biden pushed ahead with efforts to pass a $1.9 trillion relief package. Democrats are using a special procedure to move ahead on the stimulus bill: The Senate is poised Friday to approve a budget plan that would advance the reconciliation process necessary to get the aid plan approved with a simple majority in the Senate.

The fresh spending is viewed by many investors as crucial for shoring up the economy, with coronavirus cases still high across parts of the U.S.

"That would be a huge boost to the economy." said Edward Smith, head of asset allocation research at Rathbone Investment Management. "It certainly reduces any short term risk as we wait for the vaccine rollout to get fully up to speed."

The U.S. jobs report for January, due at 8:30 a.m. ET, will show whether the economy is picking up from a winter slowdown. Employers are expected to have added 50,000 jobs last month, according to economists. Payrolls fell in December for the first time since the pandemic triggered business shutdowns last spring. The jobless rate is forecast to hold steady at 6.7%.

Investors also remain focused on the rollout of Covid-19 vaccines, which could accelerate the speed of economic recovery. Johnson & Johnson asked U.S. regulators on Thursday to authorize the emergency use of its single-shot Covid-19 vaccine, setting the stage for a potential third vaccine to become available in the U.S. within weeks.

"The more vaccines get rolled out, the more people are going to start moving around," said Gregory Perdon, co-chief investment officer at private bank Arbuthnot Latham.

Volatility in markets has also declined this week, after soaring at the end of January to its highest level since late October. The spike came as individual investors on online forums injected money into a handful of stocks, leading to frenzied trading and sharp jumps in prices. The Cboe Volatility Index, a gauge of turbulence in the broader U.S. stock market, fell to less than 22 on Friday, from over 37 last week.

Those heavily traded stocks have since lost their steam, with GameStop shedding almost 84% of its value so far this week while AMC Entertainment Holdings declined 46%.

Popular trading app Robinhood Markets removed the last of its trading limits on shares of both companies, according to its website. GameStop rose over 13% in premarket trading, while AMC gained 8%.

The corporate earnings season remains under way. Regeneron Pharmaceuticals and Estée Lauder are among the companies set to report quarterly results before the market opens.

In bond markets, the yield on the 10-year Treasury note was little changed at 1.141%, from 1.140% Thursday. Yields fall when prices rise.

Overseas, the pan-continental Stoxx Europe 600 advanced 0.4%. Shares of French bank BNP Paribas rose 2.7% after it reported a smaller-than-expected drop in profit.

In Asia, most major benchmarks advanced by the close of trading. Japan's Nikkei 225 gained 1.5%, and South Korea's Kospi Index closed 1.1% higher. Hong Kong's Hang Seng rose 0.6%. China's Shanghai Composite edged 0.2% lower.

Write to Caitlin Ostroff at caitlin.ostroff@wsj.com

(END) Dow Jones Newswires

February 05, 2021 05:19 ET (10:19 GMT)

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