Stocks - U.S. Futures Halted Limit Up; More Stimulus Eyed

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Stocks - U.S. Futures Halted Limit Up; More Stimulus Eyed
Credit: © Reuters.

By Peter Nurse - U.S. stocks are set to post strong gains Tuesday, as investors expect the country’s political leaders to follow the lead set by the Federal Reserve and come up with a hefty stimulus to shore up the economy against the coronavirus pandemic.

At 7:00 AM ET (1100 GMT), futures for the three main U.S. indices are halted limit up, i.e. after having traded 5% higher. Still, the benchmark SPDR S&P 500 ETF (NYSE: SPY ) traded 4.6% higher, the SPDR Dow Jones Industrial Average ETF (NYSE: DIA ) was up 4.3% and the Invesco QQQ Trust (NASDAQ: QQQ ), a proxy for the Nasdaq, up 5.2%. The ETFs are not required to the same extent to be halted during wild swings.

The Federal Reserve announced a sweeping extension of its plans to backstop businesses and consumers on Monday by increasing its asset purchases by any volume necessary. 

Attention now turns to Capitol Hill, with the U.S. Senate expected to finally pass a coronavirus economic stimulus package, which could total as much as $2 trillion, despite failing so far to reach a bipartisan agreement amid arguments over spending priorities and the loose conditionality attached to federal aid for big business.

The latest economic data coming from Europe provided a reminder of the urgent need for such a package to be agreed. 

The IHS Markit’s measure of eurozone private-sector activity plunged to the lowest since the index was started -- and the currency bloc was formed -- more than two decades ago. 

“Business activity across the euro zone collapsed in March to an extent far exceeding that seen even at the height of the global financial crisis,” said Chris Williamson, chief business economist at IHS Markit. “Business sentiment about the year ahead has plunged to the gloomiest on record, suggesting policy makers’ efforts to date have failed to brighten the darkening picture.”

This doesn’t bode well for the equivalent U.S. numbers, due at 9:45 AM ET, with U.S. manufacturing and services PMIs also expected at multi-year lows.

In corporate news, oil giant Chevron (NYSE: CVX ) has announced plans to cut its 2020 capital spending by 20% while suspending its $5 billion share buyback. However, it will not cut its dividend.

Also in the spotlight will be the major U.S. airlines, amid reports that they  are drafting plans for a potential voluntary shutdown of virtually all passenger flights across the U.S..

Elsewhere, oil has bounced on hopes that the U.S. will strike a deal with Saudi Arabia after comments from U.S. Energy Secretary Dan Brouillette.

At 07:00 AM ET (1100 GMT), U.S. crude futures traded 5.7% higher at $24.68 a barrel. The international benchmark Brent contract rose 4.1% to $28.13.

Additionally, gold futures rose 6.2% to $1,666.05/oz, while EUR/USD traded at $1.0887, up 1.6%.

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