U.S. Stock Futures Fell Modestly On Renewed U.S.-China Tensions
U.S. stock futures were marginally lower on Sunday evening. This came after the Trump administration is looking to blacklist Chinese leading chip maker Semiconductor Manufacturing International Corporation (SMICY Stock Report) and national offshore oil and gas producer CNOOC Limited (CEOHF Stock Report) due to military ties. This in effect will prohibit investment firms and pension funds from investing in shares of these companies. Apart from these restrictions, these blacklisted companies will not be allowed to be involved in any business transactions with U.S. companies.
Investors are looking to brace for heightened volatility within the stock market from the heightened U.S.-China trade tensions and surging COVID-19 infections. The Dow and S&P 500 futures were marginally lower, moving 0.43% and 0.21% lower respectively as of 7:30 a.m. ET, while Nasdaq futures appear to be bucking the trend, increasing by 0.30%.
Despite the weakness on the last day of the month, major indexes are likely to end November on a strong note. The Dow has risen by 12.9% this month. That means this could be its best month since January 1987. This came as positive vaccine developments inspired confidence that an economic reopening will be coming very soon. The S&P 500 and the Nasdaq have also done well this month, climbing 11.3% and 11.9% respectively. That would be their biggest monthly gains since April this year.
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November Jobs Report
The U.S. Labor Department’s November job reports will be one of the data points that might influence the stock market this week. After all, it will signal the health of the overall economy which is still feeling the impact of the pandemic. November’s unemployment rate could have improved just marginally. Analysts expect the jobless rate to fall to 6.8%, from the 6.9% figure in October. That compares with the 14.7% rate at the peak of lockdowns in April. Yet, the unemployment rate is still almost double that before the pandemic.
With demand for outdoor leisure continuing to be weak, Disney (DIS Stock Report) reported last week that it would lay off 4,000 more workers than previously announced mostly at its theme parks. Southwest (LUV Stock Report) has also warned that around 2,000 employees their jobs could be at risk in the coming months. That would mark the first layoffs in the airline’s history.
Zoom Video Communications (ZM Stock Report) has been the poster child among the stay-at-home stocks. It expects to report its third-quarter results after the closing bells today. Since the start of the coronavirus pandemic, its results have gotten a huge boost. That’s because of the surge in people working and learning from home.
“While COVID-19 helped drive incredible recognition and uptake of Zoom’s best-of-breed product, it also made businesses recognize Zoom’s importance as a tool in the Work-From-Anywhere environment that is likely to emerge post-pandemic,” Mizuho Securities analyst Siti Panigrahi wrote in a recent note. “In our view, the company’s near- and long-term growth drivers remain intact, and its license-based (not usage-based) model provides downside protection.”
Zoom has performed favorably in comparison with analysts’ estimates in pretty much every quarter since its initial public offering back in April 2019. But it remains a big question as to whether it will continue outperforming. Admittedly, many would like to believe so. Of course, if that’s the case, chances are it is already reflected in the price.
Oil Price Slips Ahead Of OPEC+ Meeting
Crude oil prices were under pressure amid investor jitters ahead of a meeting of a producer group OPEC+ on whether to extend large output cuts to balance global markets. The three promising coronavirus vaccines have sent oil prices higher. This came as investors anticipate a strong rebound in the oil demand in 2021. Analysts expect OPEC+, which comprises the Organization of the Petroleum Exporting Countries and allies including Russia, to postpone next year’s scheduled increase in oil production. This came as a second or even third wave of COVID-19 has impacted demand for fuel globally.
Caroline Bain, chief commodities economist at Capital Economics said that the meetings on Monday and Tuesday won’t spring any surprises. An extension of the production cut is largely priced in. Also, she now thinks that the Brent oil price will stand at $60 per barrel by the end of 2021. The revision came after encouraging developments on the vaccine front that could accelerate the reopening of economies after the pandemic.
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More Earnings Underway
Software providers are among the companies reporting earnings this week. Apart from Zoom, the big names to report this week include Salesforce.com (CRM Stock Report), Snowflake (SNOW Stock Report), Splunk (SPLK Stock Report), CrowdStrike (CRWD Stock Report), and Okta (OKTA Stock Report). There are also other notable names from the retail space reporting this week including Dollar General (DG Stock Report) and Kroger (KG Stock Report). As such, there will be a lot on the line when the software companies report their respective results in the days ahead.