Before The Bell
Following a strong showing by the stock market in yesterday's session, with the Dow Jones Industrial Average surging by 338 points and some mixed action in the futures last evening, equities appear set to commence trading this morning modestly to the upside. This action hopefully will precede positive action on a stimulus package by Congress before its members break for the holidays. As morning broke, in fact, both sides seemed to be getting closer to the thus far elusive deal. Expectations now are that an agreement might be brokered by weekend.
Regarding the stock market, it got off on the wrong foot to start the week on Monday, then quickly shifted gears to begin the session yesterday nicely to the upside. Accordingly, the Dow Jones Industrial Average, a 183-point loser the day before, jumped ahead by more than 200 points as the morning concluded. What had changed sentiment so abruptly in one day? The main impetus was a surge of optimism on the stimulus talks, as a pared down package appeared to be grudgingly moving ahead.
Other positive developments included more good news on the vaccine front. Not only was Pfizer's (PFE) vaccine now being readied for delivery on a massive scale, but there was good news out of a rival drug from Moderna (MRNA), which was determined to be highly effective by staff at the Food and Drug Administration. Approval of that entry could be just days away. If that vaccine secures the regulatory go ahead this week, shipments could begin by the weekend.
Meantime, on the economic front, the Federal Reserve began its two-day Federal Open Market Committee meeting yesterday morning (it will conclude this afternoon), with no changes expected in interest rates. However, traders will be closely watching the accompanying monetary statement for indications of any policy shifts in the new year. As before, we would expect the Federal Reserve to pursue a highly accommodative monetary course given the weak state of the economy.
In another key issuance, the Commerce Department reported that industrial production had edged up in November, which yielded some hope on the business front. Still, December's tally could be more problematic as the coronavirus was just heating up last month. In all, we sense that economic activity will slacken further this month and then show additional softness to start January. Hence, the clear need for a stimulus accord in the next few days.
– Harvey S. Katz, CFA
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
