U.S. Stock Futures Tick Up

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U.S. stock futures edged higher Wednesday, suggesting that the major indexes could erase tepid losses from a day earlier to extend their recent rally.

Futures tied to the S&P 500 rose 0.4%, while those linked to the Dow Jones Industrial Average gained 0.3%. Contracts on the Nasdaq-100 index also gained 0.3%. The stock indexes ended Tuesday with small declines after Senate Majority Leader Mitch McConnell blocked an effort to hold a vote on sending bigger stimulus checks to many Americans.

Stocks have largely drifted higher this month, though the momentum that powered markets through November has lost steam as investors weigh conflicting signals about the outlook for the economy. Still, the S&P 500 ended Tuesday at its second-highest closing level in history.

Investors are betting that Covid-19 inoculations will encourage states and local authorities to end restrictions on social and business activity.

Photo: Karen Focht/Zuma Press

The rollout of coronavirus vaccines and the passage of the new $900 billion fiscal stimulus package has helped buoy market sentiment in the final weeks of the year. But elevated levels of Covid-19 infections, the emergence of a fast-spreading variant of the virus, economic data showing the rebound is slowing, and the back and forth in Washington over the size of stimulus checks has tempered some of that optimism.

“We are going to keep getting this push-pull, vaccine versus virus, politics versus economics, for a while yet,” said Altaf Kassam, head of investment strategy for State Street Global Advisors in Europe. “November was a great month for markets and there was always going to be a pause for breath. December seems to be just that.”

Trading is also typically thinner in the final week of December as investors take time off during the year-end holiday period. The low liquidity can amplify market moves or lead to choppy trading sessions.

Colorado on Tuesday reported the first case in the U.S. of a fast-spreading variant of Covid-19 that was first detected in the U.K. and led to a widespread lockdown and travel restrictions there. The U.S. Centers for Disease Control and Prevention said it expected there to be additional cases in the coming days, while stressing that it is normal for viruses to change through mutations.

The U.K. on Wednesday approved the use of a coronavirus vaccine made by AstraZeneca and the University of Oxford. The inoculation is the third Western-developed vaccine to receive emergency-use approval this month, and comes as cases rise sharply in the U.S. and Europe.

Newly reported U.S. coronavirus cases topped 247,000 on Tuesday, the second-highest daily tally since the pandemic began, while hospitalizations due to Covid-19 hit another all-time high.

“There is a lot riding on the AstraZeneca vaccine in particular, much more than any other vaccine on a global level,” said Hani Redha, a multiasset portfolio manager at PineBridge Investments. “Just the sheer number of doses there will be and the fact that distribution of it is easier, particularly in developing countries, makes it important,” he added.

Investors are largely looking beyond the near-term challenges posed by the pandemic and betting that the vaccines will enable governments to begin easing restrictions and offer fresh momentum to the economic rebound. That could come as soon as April, said Emiel van den Heiligenberg, head of asset allocation at Legal and General Investment Management.

“As long as governments get immunity among the most vulnerable groups, they will see hospitalizations go down, death rates go down, and then will use that as their opportunity to open up the economy,” he said.

Home sales data for November are due at 10 a.m. ET from the National Association of Realtors. While the housing market has been a strong spot for the economy over the summer months, pending home sales dropped in October and are forecast to decline by 0.3% from the prior month as house prices rise.

The ICE U.S. Dollar Index, which tracks the greenback against a basket of other currencies, fell 0.2% and hovered close to its lowest level since March 2018.

In bond markets, the yield on the 10-year U.S. Treasury note edged up to 0.951%, from 0.934% on Tuesday.

Overseas, the Stoxx Europe 600 rose 0.2%.

In Asia, most major indexes closed higher. Hong Kong’s Hang Seng Index gained 2.2% while the Shanghai Composite rose 1.1%. South Korea’s Kospi also advanced 1.9%. Japan’s Nikkei 225 edged down 0.5%.

Write to Will Horner at William.Horner@wsj.com

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