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U.S. Stock Futures Rise on Optimism over Stimulus Prospects

U.S. stock-index futures rose Thursday morning, pointing to a positive start for equities that would build on the previous session’s gains which were attributed in part to renewed optimism over prospects for another round of fiscal stimulus from Congress.

Weekly data on U.S. jobless claims, meanwhile, will provide investors a window into whether the economy is losing steam.

What are major benchmarks doing?

Futures on the Dow Jones Industrial Average rose 155 points, or 0.6%, to 28,334, while S&P 500 futures gained 14.45 points, or 0.4%, to trade at 3,421.25. Nasdaq-100 futures were up 68.75 points, or 0.6%, at 11,538.75.

The Dow on Wednesday finished with a gain of 530.70 points, or 1.9%, at 28,303.46, while the S&P 500 advanced 58.49 points, or 1.7%, to close at 3,419.44. The Nasdaq Composite rose 210 points, or 1.9%, finishing at 11,364.60.

What’s driving the market?

Wednesday’s early gains came after President Donald Trump tweeted the previous evening that he was open to piecemeal fiscal stimulus measures, including aid for airline workers. Earlier Trump had announced he had scrapped talks with congressional Democrats over another financial aid package to help support the economic recovery in the wake of the coronavirus pandemic.

“The overriding expectation by the markets at this point is that some form of stimulus is coming, sooner rather than later, and this is driving a risk-on rally,” said Fiona Cincotta, analyst at City Index, in a note.

Others argued that stimulus-related optimism is centered more on the potential for a more sweeping package in January after the November elections. Also, fears of a contested election, which could leave the outcome of the Nov. 3 contest in doubt for weeks, have faded as polls show Democratic challenger Joe Biden increasing his lead over Trump, analysts said.

While a Biden administration would aim to repeal Trump’s corporate tax cuts and increase regulation across a number of industries, the potential for a drawn-out and divisive post-election fight has been viewed as a worst-case scenario by many investors.

“Our base case is a Biden win and Democrats sweeping Congress. In this scenario, the Democrats pursue a net fiscal stimulus that combines tax hikes with an elaborate spending plan on energy and climate change management,” wrote analysts at Credit Suisse, in a note.

A vice presidential debate Wednesday night was viewed as a much more civil affair than last week’s clash between Trump and Biden, but appeared unlikely to change the election dynamic, analysts said.

Meanwhile, data on weekly U.S. jobless claims will be watched for clues to the state of the economic rebound. Analysts surveyed by MarketWatch forecast first-time claims to fall to 820,000 in the week ended Oct. 3 from 837,000 a week earlier.

Which companies are in focus?

  • Shares of International Business Machines Corp. rose 6% in premarket trade after the technology company said it would separate its managed infrastructure services unit of its Global Technology Services division into a new public company.
  • Regeneron Pharmaceuticals Inc. shares were up more than 4% premarket after Trump praised an experimental antibody cocktail made by the company which is still in clinical trials. Trump was administered the combination when he was hospitalized for COVID-19.

Source: Marketwatch

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