UK markets open in 10 minutes

US Stocks Struggle Early after Tuesday’s Overcooked Rally

James Hyerczyk

The major U.S. stock indexes are drifting lower early Wednesday as investors awaited an unprecedented stimulus package to fight the economic impact of the coronavirus. The price action suggests investors are still paying close attention to the headlines about U.S. lawmakers closing in on a massive fiscal stimulus bill work $2 trillion to combat the economic damage from the pandemic.

At 04:44 GMT, the benchmark June E-mini S&P 500 Index is trading 2389.00, down 49.00 or -2.01%. The blue chip June E-mini Dow Jones Industrial Average is at 20286, down 322 or -1.56% and the technology-based NASDAQ-100 Index is at 7379.50, down 175.25 or -2.32%.

On Tuesday morning, House Speaker Nancy Pelosi told CNBC that there is “real optimism” Congress can clinch a pact within a few hours. Senate Majority Leader Mitch McConnell later said the bill is at the “five-yard line.”

Pelosi’s comments may have ignited Tuesday’s rally, which saw the Dow Jones Industrial Average cash market soar more than 2,100 point, or more than 11%, notching its biggest one-day percentage gain since 1933 and its best point increase ever.

However, expectations that the stimulus bill talks may extend into Wednesday morning due to the two parties working through the text and hashing out the final details, may be weighing on the U.S. indexes during Wednesday’s pre-market session.

Additionally, some experts see a struggle for the economy and the stock market despite the huge rally on Tuesday and the stimulus help because there is no clear sign that the coronavirus outbreak will be contained soon.

“This is a one-day bull market,” CNBC’s Jim Cramer said on “Closing Bell” on Tuesday. “You had stocks that moved so much they basically moved as if the second half of the year is going to be good. I struggle to find out why the second half of the year should be good…I hate this kind of rally. This was a machine driven rally, just like the sell-offs…I want to wait to see.”

Furthermore, the volatility or fear index remains near its all-time high reached last week at 82.69, which means investors are still nervous about the future. Normally, the S&P 500 Index moves up or down about 1% every day. What the volatility index is saying is that investors should continue to expect up and down moves of about 3% to 4% per day. This is hardly the movement to expect of a “new” bull market.

This article was originally posted on FX Empire