By Thomas Franck, CNBC–
Futures contracts tied to the major U.S. stock indexes rose early Monday as investors weighed comments by Federal Reserve Chairman Jerome Powell on the state of the economy against signs of optimism as states began to reopen for business over the weekend.
Dow Jones Industrial Average futures implied an opening gain of more than 270 points. S&P 500 and Nasdaq futures also pointed to gains at the open.
The overnight moves Sunday evening followed a red week on Wall Street. The Nasdaq Composite and S&P 500 fell 1.1% and 2.2%, respectively, last week with the latter notching its worst week since March. The Dow industrials finished the week down 2.65% for its third negative week in four and its worst week since April 3.
Investors on Sunday night heard from Federal Reserve Chairman Jerome Powell, who spoke with CBS’ “60 Minutes” to detail the impact of Covid-19 on the U.S. economy and the path back toward growth.
The central bank leader struck a cautiously optimistic tone, telling the show that he’s “highly confident” the U.S. economy will claw its way back from the current pullback, but warned that it may not fully recover until a Covid-19 vaccine is complete.
He also said he does not believe the current downturn will resemble the Great Depression some 90 years ago despite the possibility that the U.S. unemployment rate could peak around 25%.
“I don’t think that’s the likely outcome at all. We had a very healthy economy two months ago. Our financial system is strong,” he said. You have governments around the world, and central banks around the world, responding with great force and very quickly. And staying at it.”
“So I think all of those things point to what will be a … it’s going to be a very sharp downturn, [but] it should be much shorter downturn than what you’d associated with the 1930s,” Powell said.
Wall Street’s veteran investors say stocks could be in for choppy trading until it’s clear that state efforts to reopen their economies aren’t met with significant spikes in new cases of Covid-19. This weekend most states either partially or completely ended lockdowns.
A flurry of recent economic data, including record-setting unemployment figures and a 16.4% plunge in April retail sales, show just how abruptly state-imposed business closures impacted the broader U.S. economy.
Patrick Leary, chief market strategist at Incapital, told CNBC’s Patti Domm that financial markets are looking a little fatigued between abysmal economic data, recent state-by-state efforts to restart business and worries over renewed animosity between the U.S. and China.
“Market reactions to the data have been somewhat muted,” he said. He said stocks on Friday were reacting negatively to threats from China that U.S. companies could be targeted if the U.S. does not ease up on Huawei.
“The markets right now don’t need another reason to be pessimistic. It seems like both the bond market and stock market are getting a little tired. Both markets are looking for the next catalyst,” he added.
—CNBC’s Jeff Cox and Patti Domm contributed reporting.