US pre-open: Futures point to early gains amid vaccine optimism

US futures had stocks opening higher for a second straight session on Wednesday amid optimism regarding the reopening of the economy and a potential Covid-19 vaccine.

As of 1215 BST, Dow Jones futures were up 1.43%, while S&P 500 and Nasdaq-100 futures had the indices opening 1.21% and 0.91% firmer, respectively.

The Dow closed 529.95 points higher on Tuesday as investors returned from the Memorial Day long weekend to news that pharmaceuticals firm Novavax had begun trials on a Covid-19 vaccine in Australia.

While vaccine hopes drove yesterday’s rally, news that the White House was considering sanctions on Chinese firms and officials due to the nation’s new laws granting it executive powers in autonomous Hong Kong knocked stocks off their session highs. Donald Trump also vowed to provide an update on the government’s response to the matter by the end of the week.

However, futures seemed to indicate that the memories of market participants were short, with shares in the likes of cruise operator Carnival and carrier United Airlines jumping 14.86% and 8.87% ahead of the bell, respectively, as investors continued to bet on the reopening of the US economy.

Oanda‘s Craig Erlam said: “Stock markets are making strong gains once again on Wednesday as investors turn a blind eye to increasing friction between the US and China and focus on the exciting prospect of economies reopening after months of lockdown.

“The stock market recovery appeared to stall in May but it seems to have found some momentum once again, with the news of human vaccine trials naturally aiding the move. While the data we’re seeing so far is encouraging, there may be diminishing returns so the longer we go without a vaccine or cure, the worse the data could become. Thankfully, what we’re seeing in both of these cases gives us cause for optimism.”

On the data front, US applications for home mortgages increased for a sixth straight week last week, indicating that the housing market could lead the economy’s recovery.

The Mortgage Bankers Association said on Wednesday that its seasonally adjusted Purchase Index had increased 8.6% week-on-week, while on an unadjusted basis, the index rose 7.4% from the prior week and was 9% higher year-on-year.

Still to come, the Federal Reserve’s beige book will be released at 1900 BST, while Fed head James Bullard will deliver a speech at 1730 BST.

On the corporate front, shares in Goldman Sachs, Raytheon Technologies, American Express, Boeing and JP Morgan Chase were all up more than 2% ahead of the bell, while futures in trade bellwether Caterpillar and Walgreens Boots Alliance had the stocks opening at least 1% firmer.

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