Dow futures drift higher as stocks set to notch a fourth straight week of gains

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December 20, 2019
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December 20, 2019

Dow futures drift higher as stocks set to notch a fourth straight week of gains

The Dow and S&P 500 have ended higher in 6 of the past 7 sessions

U.S. stock-index futures edged higher early Friday, ahead of Friday’s quadruple-witching session when December futures and options contracts will expire, and after setting more records in the previous session.

Investors were digesting an update on third-quarter U.S. GDP growth that showed strong consumer spending was offset by weaker business investment in inventories.

What are stock indexes doing?

Futures for the Dow Jones Industrial Average YMH20, +0.16%  were up 38 points, or 0.1%, at 28,424, those for S&P 500 index ESH20, +0.12% were up 16 points, or 0.5%, while Nasdaq-100 futures NQH20, +0.24% picked up 25.5 points, or 0.3%, at 8,668.

On Thursday, the Dow DJIA, +0.49%  rose 137.68 points, or 0.5%, to a record 28,376.9 close, while the S&P 500 index SPX, +0.45% gained 14.23 points, or 0.5%, at 3,205.37, its all-time high. The Nasdaq Composite Index  COMP, +0.67%  added 59.48 points, a gain of 0.7%, at 8,887.22, extending its seventh-day winning streak and setting another record.

For the week, the Dow is on pace to gain 0.9%, the S&P 500 is poised for a 1.2% return, while the Nasdaq Composite is on track for a 1.7% weekly advance, as of Thursday’s close.

Year-to-date the Dow is now up 21.65%, the S&P 500 index up 27.86% and the Nasdaq up 33.94%.

What’s driving the market?

The Commerce Department’s third estimate of third-quarter GDP, published Friday, left growth unchanged 2.1%, matching consensus expectations according to a MarketWatch poll, with strong consumer spending offset by weaker business investment in inventories.

Wall Street sentiment remains supported by progress on international trade policy, after the U.S. House passed the USMCA bill to replace NAFTA on Thursday and the U.S. and China agreed on a partial deal last Friday. On Thursday, Treasury Secretary Steven Mnuchin expressed little doubt that trade negotiators representing the U.S. and China would sign a so-called phase-one trade deal in early January.

“This is a boost to Mr. Trump, who considers it to be his signature trade deal, and reduces one source of uncertainty for firms, but it is dominated by the ongoing uncertainty over US-China trade talks,” wrote analysts at UniCredit, in a Friday research note.

However, some investors warned that the market may be due for a modest pullback after the Dow and S&P 500 index closed higher for six of the past seven sessions.

“The underlying strength of the markets continues to fortify [signals] that the year end rally is in good shape but could soon begin to digest its gains. In other words, consolidate,” wrote Peter Cardillo, chief market economist at Spartan Securities, in a daily note.

Congress also passed spending bills Thursday to avoid a partial government shutdown and the White House confirmed President Trump would sign the bills.

Investors continue to shake off Wednesday’s impeachment vote by the Democratic Party controlled House, amid expectations that the Republican-controlled Senate will vote against removing Trump and House Speaker Nancy Pelosi on Tuesday threatening to delay submitting the articles of impeachment to the Senate.

Looking ahead, the U.S. Commerce Department will publish consumer spending figures at 10 a.m. ET, and the University of Michigan’s consumer sentiment survey will be published at the same time.

Separately, quadruple witching day, the four-pronged expiration of stock and stock-index futures and options tends to contribute some increased volume in the latter portion of the trading day. It comes during a year-end holiday period where banks aim to shore up their capital to comply with regulatory requirements, which could conversely, deflate volumes over the last several days of the year.

Which stocks are in focus?

U.S. Steel CorpX, -6.29%  announced Thursday afternoon that its financial performance will be worse than expected in the fourth quarter, and the company plans to slash its dividend, suspend stock repurchases, lay off workers and suspend some operations. Shares were down 6.9% in premarket trade

Nike Inc. NKE, -0.41%  late Thursday reported big jumps in its quarterly profit and sales, but the stock faltered in the extended session following a string of records this week. Shares were down 1.5% in premarket action, though they have risen 11 of the past 12 trading days, and hit a record close of $101.15 on Thursday’s regular session.

CarMax IncKMX, -4.35%  shares fell 3.8% before the start of trade Friday after the used-vehicle retailer missed fiscal third-quarter profit expectations.

BlackBerry LtdBB, +7.75%  share rallied 5.3% in premarket action Friday, after the Canada-based security software company posted third-quarter revenue growth that beat analyst expectations. The stock has fallen 18.3% in 2019 through Thursday’s close, however.

How are other markets trading?

The yield on the 10-year U.S. Treasury note TMUBMUSD10Y, +0.51%  rose 2 basis points to 1.930%, putting it within reach of a fourth-month high of 1.950%.

Crude oil prices were pulling back, with the value of a barrel of West Texas Intermediate crude for February delivery CLG20, -0.29%  edging 20 cents lower, or 0.3%, to $60.98. The price of an ounce of gold for February delivery GCG20, -0.02%  , meanwhile, declined $1.50, or 0.1%, to $1482.90.

The U.S. dollar was ticking higher, with the ICE US Dollar index DXY, +0.16%  gaining 0.2%.

In Asia overnight, stocks traded mostly lower, with the China CSI 300 000300, -0.25%  falling 0.3%, Japan’s Nikkei 225 NIK, -0.20%  down 0.2% and Hong Kong’s Hang Seng index HSI, +0.25%  rising 0.3%.

In Europe, stocks were mostly higher, as reflected by the Stoxx Europe 600’s SXXP, +0.58%  0.6% rise.