Stock Futures Edge Up as Dow Nears 20000
Blue-chip index closed at a record in previous session
By Riva Gold Updated Dec. 21, 2016 6:52 a.m. ET
Futures pointed to a small opening gain Wednesday for the Dow Jones Industrial Average, after the blue-chip index closed at its 26th record high of the year but ended just shy of the 20000 milestone.
U.S. stocks have rallied since November, as surveys have pointed to high levels of optimism among retail investors and corporate executives. If the Dow gets to 20000 before Christmas, it will be the shortest amount of time between 1000 point thresholds in the index’s history, according to Bespoke Investment Group.
Markets in Europe and Japan have also largely climbed back from a bruising start to 2016. The Stoxx Europe 600 inched down 0.3% late morning on Wednesday as losses in Southern European banks weighed on the broader index, which settled Tuesday at its highest close since December 2015.
The total value of the global equity market has climbed by roughly $3 trillion since the Nov. 8 election, while the value of global bond markets has declined by roughly the same amount, according to Deutsche Bank research.
“We’ve ticked through everybody’s worries this year—Brexit, the U.S. election, the Italian referendum—and all the while, here we are higher,” said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management Company.
While hopes that President-elect Donald Trump will reduce regulation and bring about tax reform have contributed to the rally, Mr. Trump’s election was largely a catalyst for the market to realize a fundamental improvement in the global economy, he said.
Federal Reserve Chairwoman Janet Yellen pointed to recent improvements in the U.S. economy on Monday, while the Japanese government raised its view of the domestic economy for the first time in nearly two years on Tuesday, a day after the Bank of Japan raised its own assessment.
Some investors have been skeptical of the recent rally, however, pointing to uncertainty over which policies will be implemented next year under the new U.S. administration and the risks of a more protectionist stance on trade.
Emerging markets have made little traction in the past month, due to concerns about Mr. Trump’s positions on global trade and worries over the Chinese economy.
A screen shows a festive greeting at Madrid's Stock Exchange, in Madrid, Spain, this week. ENLARGE
A screen shows a festive greeting at Madrid's Stock Exchange, in Madrid, Spain, this week. Photo: Zuma Press
“We’re going to start 2017 on a very cautious note, because the way the market seems to be only discounting the good things Trump might do and pretending as though none of the bad is going to come to pass is rather worrying,” said Edward Smith, asset allocation strategist at Rathbones, who is reducing exposure to U.S. stocks and holding more in cash.
Shares of troubled Italian lender Banca Monte dei Paschi di Siena were down more than 18% at one point on Wednesday before recovering. Traders said news on its liquidity and debt-to-equity swap offer weighed on shares as investors increasingly expect the lender to be bailed out as soon as this week.
Spanish bank shares also declined following a ruling by the European Court of Justice, sending the wider Euro Stoxx Banks Index down 0.8%.
In currencies, the WSJ Dollar Index edged down 0.1% after settling at a 14-year high on Tuesday. The euro was up 0.1% at $1.0400 after record capital outflows contributed to pushing the European common currency close to parity with the dollar.
The dollar was down 0.4% against the yen at ¥117.4640, weighing on Japan’s Nikkei Stock Average. Japanese stocks dipped 0.3% Wednesday but remained near their best levels this year.
Markets elsewhere in Asia mostly closed with gains, boosted by the strong finish on Wall Street. Hong Kong’s Hang Seng added 0.4%, while Shanghai stocks rose 1.1%. Markets in Australia added 0.4%, with the basic resources sector gaining as metals prices strengthened.
Brent crude oil was also up 0.4% at $55.59 a barrel after data showed a bigger-than-expected drop in U.S. crude stockpiles.
In bond markets, German 10-year bund yields softened slightly to 0.242% from 0.261% Tuesday, while the yield on the 10-year U.S. Treasury note was slightly lower at 2.553% from 2.566%. Yields move inversely to prices.
Yields on long-dated U.S. government bonds have risen for eight of the past nine sessions, on track to end the year higher, amid expectations for stronger growth and inflation and tighter monetary policy in the U.S., Europe and Japan.
For most of 2016, “we worried about deflation and would the Fed tighten at all, and now we’ve moved from that pessimistic narrative to one of worrying about how high inflation does go and will the Fed tighten more than expected,” said Mr. Schutte.
—Charles Duxbury, Chris Dieterich and Giovanni Legorano contributed to this article.
Write to Riva Gold at
riva.gold@wsj.com