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Dow Futures Ignores Grinch Warnings to Continue Christmas Rally

Harsh Chauhan
Last Updated September 23, 2020 1:26 PM
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  • Dow Jones futures are up early Thursday.
  • The stock market could record a fifth straight day of gains.
  • Red flags persist in the form of Boeing and weak manufacturing activity.

Futures on the Dow Jones Industrial Average (DJIA) are swinging higher early Thursday morning as the stock market looks set to ring in its fifth consecutive day of gains. The Dow ended Christmas Eve with a bang thanks to strong consumer spending data and the stock market could build upon that positivity today.

On Saturday that fell just before Christmas, U.S. consumers shelled out $34.4 billion at retailers , according to data from Customer Growth Partners. This was the highest amount spent by consumers in a single day this year, and also in history. Meanwhile, favorable developments for the U.S. in the wake of the trade deal with China could be another catalyst for the Dow today.

Bloomberg reports that Chinese imports of soybeans from the U.S. hit a 20-month-high in November. Inbound shipments of U.S. soybeans into China surged to 2.6 million tons in November as compared to just 1.1 million tons in October. This massive jump can be credited to the trade deal that has been agreed between the two countries and will be signed soon.

This jump in soybean imports by China is a clear indication that American cargo ships are being cleared by Chinese customs. This sets the stage for an increase in American farm purchases by the Chinese. It won’t be surprising to see if this development has a positive impact on the Dow and the stock market today.

Dow futures switch to a higher gear as the feel-good factor remains

Dow Jones futures were up 36 points, or 0.13 percent, as of 5.56 am ET. This indicates that the stock market will open higher on the back of the positive sentiment.

Chart showing dow jones futures.
Dow Jones futures indicate that the stock market’s rally is all set to continue post-Christmas. | Source: Yahoo! Finance

Futures on the S&P 500 are also up 0.16 percent while Nasdaq Composite futures are up 0.13 percent. In all, the stock market seems set for a strong day post-Christmas.

A few red flags that could dent the stock market’s optimism

Investors shouldn’t turn a blind eye to a few negatives that are lingering right now as they have the potential to negatively impact the Dow today.

Though consumer spending data shows that sentiment is strong, the U.S. economy isn’t entirely out of the woods just yet. Data from the Richmond Fed shows that manufacturing activity in the central Atlantic region declined in December.

The Richmond Fed’s composite manufacturing index was negative five in December. The reading came in at minus one in November, indicating that the slowdown in the manufacturing sector has worsened. The market was expecting an expansion in manufacturing activity with a positive reading of 9. But the actual data is way off that mark.

But we have seen that investors have been willing to overlook negative data. That might be the case once again today. The strength in consumer spending and the fact that the U.S. GDP grew at a nice clip in the third quarter could encourage investors and the Dow to overlook this negative regional data.

Another piece of bad news could arrive from Boeing (NYSE: BA). The Dow’s biggest component could end up playing spoilsport today as new documents pertaining to the 737 MAX investigations suggest that the aircraft might not get off the ground soon. It seems that fresh documents submitted by the aerospace giant to the Federal Aviation Administration and the House of Representatives have thrown up some more alarming facts.

Quoting an anonymous Boeing employee , a Reuters report says:

“Similar to other records previously disclosed by Boeing, the records appear to point to a very disturbing picture of both concerns expressed by Boeing employees about the company’s commitment to safety and efforts by some employees” to make sure Boeing’s production plans were not disrupted, said the aide, who spoke on condition of anonymity.

So, it is not all hunky-dory for the stock market today as red flags remain. But the Dow could stitch together another day of gains thanks to the Santa Claus rally that has drummed up investor enthusiasm this holiday season.