Dow futures rise 250 points as equities appear to add to record levels

Pedestrians walk in snow past the Wall Street subway station near the New York Stock Exchange.

Michael Nagle | Bloomberg | Getty Images

Futures contracts tied to the major US stock indices rose in expanded trading Monday night after finishing strong last week.

Dow futures rose 250 points, suggesting an implicit opening of roughly the same size, while S&P 500 contracts added 27 points or 0.7%. Nasdaq 100 futures received 95 points, also a gain of 0.7%.

The US stock market closed on Monday for President’s Day.

Strategists cited a decline in Cboe Volatility Index, widely regarded as Wall Street’s best fear meter, for the recent optimism in the markets.

Fundstrat founder Tom Lee said VIX’s fall below 20 means investors have become more comfortable in the short term.

“Fear is withdrawing from the market,” Lee, a CNBC contributor, wrote of the move Friday. “And recurring fears are followed by systematic and quantum funds that add ‘leverage’ – in other words, this is a setup to watch a rally.”

Cboe Volatility Index

The biggest averages ended last week with decent wins, even as the February rally seemed to cool somewhat. The blue chip Dow Jones industrial average posted two small change days, while the S&P 500 fluctuated within 0.2% for three consecutive days.

Still S&P 500 ended the week with a gain of 1.2%, while the Dow added 1%. The technological heavy Nasdaq Composite rose 1.7%. All three closed at record levels on Friday.

Relieving fears of Wall Street is likely largely due to the rollout of the Covid-19 vaccine, economic reopening and expectations of more fiscal stimulus.

“Covid is far from defeated, but the path to economic normalization is clearer as more vaccines that reduce hospitalizations and eliminate deaths are approved,” Dennis DeBusschere, strategist at Evercore ISI, said in an email.

“Minister of Finance [Janet] Yellen’s strong arguments for further stimulus followed by Fed chairman [Jerome] Powell described the maximum employment as ‘our national target’ helped raise bond yields, inflation expectations and oil prices last week, “he added.

The Dow rose 4.9% in February, while the S&P 500 and Nasdaq averaged 5.9% and 7.8%, respectively. The S&P 500 has raked in ten record closures in 2021.

Pedestrians walk past a snow-covered bull sculpture during a late-season nor’easter in New York.

Lucas Jackson | Reuters

Still, DeBusschers warned that rising interest rates and an uncertain political perspective could prevent trading from becoming too frothy in the short term, and advised investors to stick to cyclical stocks, which could look most upward when the US economy recovers.

These so-called cyclical sectors, the most sensitive to an economic recovery, have led the rally in February. Energy is more than 13% month to date, with economics and materials also among the leading sectors.

Freezing weather in regions across the United States triggered another rally in energy futures Monday and put West Texas Intermediate raw contracts above $ 60 per. barrel for the first time since the early days of the coronavirus pandemic.

In company news, CVS health, Occidental Petroleum, Palantir and others report earnings Tuesday.

Leaders from Robinhood, Melvin Capital and Citadel are scheduled to testify before the House Financial Services Committee on Thursday. Lawmakers are likely to grill the group on the wild trading of GameStop and other highly short-circuited stocks.

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