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Stock futures were mixed on Monday as traders braced for the final week of a volatile September.
Energy stocks gained as investors bet on a continued economic recovery with U.S. Covid cases declining. But tech shares were lower.
Also weighing on sentiment was a potential government shutdown to end the week.
Futures on the Dow gained 67 points, or 0.2%. But S&P 500 futures inched lower and Nasdaq 100 futures shed 0.5.
Stocks linked to the economic comeback led the premarket gains as U.S. Covid cases continued to roll over. There were 114,000 new cases, on average, the last 7 days through Friday, down from a 7-day average of about 160,000 cases at the peak of this latest wave in early September, according to the CDC.
Carnival Corp rose 2% and United Airlines added 1% in premarket trading.
Exxon Mobil and Occidental Petroleum led gains in the energy sector as WTI crude continued its September run, topping $74 a barrel.
The 10-year Treasury yield increased on the economic optimism, topping 1.49% on Monday. That’s the highest since June and up from 1.30% at the end of August.
On the flip side, tech stocks were under some pressure as investors rotated out higher valuation shares as yields increased. Alphabet, Apple and Nvidia were lower in premarket trading, weighing on futures for the S&P 500 and Nasdaq.
Investors are monitoring the progress in Washington as lawmakers try to prevent a government shutdown, a default on U.S. debt and the possible collapse of President Joe Biden’s sweeping economic agenda.
House Speaker Nancy Pelosi said Sunday that she expects the $1 trillion bipartisan infrastructure bill to pass this week, but voting on the legislation may be pushed back from its original Monday timeline.
Congress must pass a new budget by the end of September to avoid a shutdown, and lawmakers must also figure out a way to increase or suspend the debt ceiling in October before the U.S. would default on its debt for the first time.
“DC will start garnering more attention in the coming weeks as the political calculus around passing infrastructure bills and the debt ceiling debate likely guarantees some market moving headlines,” wrote Tavis McCourt, institutional equity strategist at Raymond James.
Wall Street is coming off a roller-coaster week amid a slew of concerns from the debt crisis of China’s real estate giant Evergrande, to the Federal Reserve’s signal on rollback in monetary stimulus, and to Beijing’s crackdown on cryptocurrencies. Still, major averages managed to wipe out steep losses earlier in the week and eke out small gains.
The blue-chip Dow finished the week 0.6% higher, breaking a three-week losing streak. The S&P 500 rose 0.5% on the week, while the tech-heavy Nasdaq Composite edged up 0.02% last week.
“The market recovery indicated that the buy-the-dip mentality remains,” Mark Hackett, chief of investment research at Nationwide, said in a note.
So far, September is living up to its reputation for volatility and weakness as major averages have all registered modest losses. The S&P 500 is off by 1.5%, on track to post its first negative month since January. The broad equity benchmark is about 2% off its record high from Sept. 2. The Dow is down 1.6% for the month, while the Nasdaq is down 1.4%.
But overall, investors continue to buy the dip for stocks. The S&P 500 fell as much as 4% from its record during the month before turning around. Friday was 224 trading days since the last 5% pullback, the 8th longest streak since 1930, according to Goldman Sachs.
“We continue to exercise caution in the near term, especially as we enter the seasonally weakest part of the year (late September — mid-October),” Larry Adam, CIO at Raymond James, said in a note. “However, given continued robust economic growth, our bias is to hold existing equity exposure or add opportunistically on weakness.”
Elsewhere, bitcoin rebounded about 2% to $43,454 after dropping 5% on Friday. The sell-off came after China’s central bank declared all cryptocurrency-related activities illegal.