The Futures Rise Wednesday on Bank Earnings, Hopes for Another Stimulus Agreement Soon

S&P 500 futures were up 25 points in premarket hours as investors prepared for another busy day of earnings reports. Yesterday, several economic reports indicated potential headwinds for the United States. In addition, markets are starting to raise concerns about the progress for a stimulus deal from Congress. Though the White House has pushed for a $1.8 trillion stimulus package, Speaker Nancy Pelosi has said such a number “falls significantly short” of what America needs. 

Meanwhile, the Dow Jones today is moving higher as we eye the earnings calendar. This morning, we’re looking at a slew of banking reports and updates from several Blue Chip companies. Yesterday’s schedule included an eye-opening report from Delta Air Lines (DAL), which said that revenue fell by 75% from the same period in 2019. COVID continues to batter the airline sector. 

Let’s take a look at the numbers from Tuesday before we get into the headlines driving the futures market.

IndexPrevious CloseNominal ChangePercent Change
S&P 5003511.93-22.29-0.63%
Dow Jones28679.81-157.71-0.55%

Here are the key headlines that are driving the Dow Futures this morning. Look for additional updates throughout the day.

The Rundown: Today’s Top Market Stories

  • Are you excited to listen to Richard Clarida talk today? I know he sounds like a guy who plays shuffleboard with your dad in Tampa… but this is the Vice Chair of the Federal Reserve and the potential heir to the monetary policy suitcase. He’s going to talk today at the virtual Institute of International Finance Annual Meeting. Look for Clarida to provide some views on the need for fiscal stimulus from Congress.

  • A lot of people are asking me about why the market continues to tick higher. Well, this all comes down to outright optimism about four things: Stimulus, the end of the pandemic, an economic recovery by early 2021, and an election that doesn’t go off the rails. And even if things do go south, investors are hoping that the Fed will simply start throwing money out of helicopters. The reality is that we’re walking a very fine line right now, and we should be a little more cautious about how we trade. Momentum remains positive, and investors should ride this out as long as they can. But prepare for me to issue a statement on market momentum the moment that it goes negative. At that point, it will be a good time to start selling calls, building cash to buy on the dip, and turn to inverse ETFs for a little while. My expectation now is that we are going to see yet another 5% to 10% selloff, and it could come toward the third week of November if we’re still in limbo over the election.

COVID-19 Updates

This morning, the key COVID story is CNBC’s interview with Microsoft founder Bill Gates. Gates slammed the U.S. response to COVID-19 in an interview with CNBC Wednesday. Gates scolded government leaders for ignoring scientists at the onset of the crisis. He said that the U.S. ranks “ranks quite low compared to other countries.” Although Gates never mentioned Trump by name, he appeared very critical of the White House response from the beginning, including direction around mask wearing, handwashing, and social distancing.

Meanwhile, the U.S. government has paused Eli Lilly’s late-stage trial for its COVID-19 antibody treatment. According to reports, the pause comes due to a “potential safety concern” – although details remain unclear about the reason behind the pause. That said, this is the second day in a row that we’ve seen a setback in the effort to develop a vaccine in record time. Yesterday, Johnson & Johnson paused its vaccine trial due to an adverse effect in a volunteer.

Today’s Top Stocks to Watch: AMC, BAC, WMT

AMC: Don’t pay attention to the man behind the curtain. Deny all economic reality. This morning, AMC Entertainment CEO Adam Aron denied a Bloomberg report that the movie theater operator is running out of cash and considering bankruptcy. Aron said that the company is seeking to raise capital through a new round of equity sales, which has to make its existing shareholders very excited about dilution. The movie theater business was already under pressure from Netflix and streaming before the onset of COVID-19. Yesterday, multiple media outlets said that movie theater attendance is off 85% year-over-year. Although the company reopened about 500 theaters, the company’s current cash burn rate suggests it will have no cash remaining by the end of December.

BAC: I’m paying close attention to the Bank of America (BAC) earnings report this morning. I know that the company says that it experienced its “most tumultuous period since the Great Depression” during the June-ending quarter. But what does the company think about the economy and the months ahead? CEO Brian Moynihan is going to talk this morning. I get the sense that he’s going to try to limit the conversation about the Fed’s commitment to low interest rates and the likelihood of a recession deep into 2021. Bank of America isn’t the only big bank reporting earnings. Look for numbers from Goldman Sachs (GS) and Wells Fargo (WFC).

WMT: Walmart stores is doing its best to keep up with rival (AMZN) and its Prime Day shopping event. Walmart announced this morning that it will host in-store Black Friday sales events. However, instead of waiting until November, the company will start hosting events over the next few weeks. That’s right. It’s not even Halloween yet, but we’re going to start pushing forward the Holiday shopping season. However, the company said that it will try to prevent too many customers from visiting the physical retail centers at the same time. It plans to push many customers toward online deals in the months ahead.