Stock futures fell Tuesday evening, kicking off the overnight session lower after a rally.
During the regular session, a bevy of developments helped power the three major indices to their third straight day of gains. These catalysts included encouraging results from a trial showing that the generic drug dexamethasone helped reduce the death risk among patients with severe Covid-19 cases. And earlier reports that the Trump administration was prepping a nearly $1 trillion infrastructure package also helped provide a boost to risk assets.
More promising signs of a speedy economic recovery also contributed to the rally. New economic data Tuesday morning showed retail sales surged by a record 17.7% in May over April, with the pace of increase more than double the rate consensus economists expected. The indicator that consumer spending was recovering sharply after April’s record decline led at least some economists to pare back their expectations for the depth of the contraction in economic activity for the second quarter this year.
“The 17.7% m/m rebound in retail sales in May indicates that, as the lockdowns were eased in many states, activity started to recover more quickly than we – and others – had been anticipating,” Andrew Hunter, senior U.S. economist for Capital Economics, wrote in a note. “As a result, we now estimate that real consumption and overall GDP both contracted at a 30% annualized pace in the second quarter, rather than the 40% fall we previously expected.”
While the latest batch of new economic data, including the May jobs report earlier this month, has surprised sharply to the upside, many economists and policymakers continue to call attention to risks of protracted economic weakness remain so long as the coronavirus pandemic continues. Densely populated states including Florida and Texas continued to battle resurgences in new cases and hospitalizations, based on new daily data from these states.
Federal Reserve Chair Jerome Powell, for his part, said during testimony before the Senate Banking Committee Tuesday that, “ Until the public is confident that the disease is contained, a full recovery is unlikely.” Powell, who is also scheduled to testify before the House Financial Services Committee Wednesday, also defended the Fed’s recently announced decision to expand its purchases in the secondary market to include individual corporate bonds, saying the central bank wants “to be there if things turn bad in the economy.”
6:03 p.m. ET Tuesday: Stock futures open lower
Here were the main moves at the start of the overnight session for U.S. equity futures, as of 6:03 p.m. ET:
S&P 500 futures (ES=F): 3,121.5, down 7.25 points or 0.23%
Dow futures (YM=F): 26,232.00, down 88 points, or 0.33%
Nasdaq futures (NQ=F): 9,950.75, down 21.75 points, or 0.22%
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