US pre-open: Stocks to drop after stellar gains; Teva set to rally

US futures pointed to a weaker open on Wall Street on Thursday following stellar gains in the previous session.

At 1215 GMT, Dow Jones Industrial Average, S&P 500 and Nasdaq futures were all down 1.5%.

On Wednesday, the Dow surged more than 1,000 points, racking up its biggest one-day points gain ever. This followed Wall Street’s worst-ever performance on Christmas Eve.

Stocks in the US had rallied on the back of Mastercard data showing that sales during the holiday season rose the most in six years in 2018 and after Kevin Hassett, chairman of the White House Council of Economic Advisers, affirmed that Fed chairman Jerome Powell’s job was ‘100% safe’.

Adding to the upbeat tone were reports that a US government delegation will travel to Beijing in the week of 7 January to hold trade talks with Chinese officials.

Mike van Dulken, head of research at Accendo Markets, said: "Data suggests heavier than usual post-Christmas equity buying and rebalancing of US portfolios, likely exacerbated by recent share price declines offering more attractive entry points (oversold?) being capitalised upon while ‘normal’ trading volumes are holiday-thinned. The bounce by consumer discretionary and tech supports this theory."

The positive tone was short-lived, however, with futures firmly in the red by midday on Thursday, no doubt as traders stepped in to take some profits.

Russ Mould, investment director at AJ Bell, noted the 5% surge the S&P 500 index on Wednesday.

"Encouragingly, three of the seventeen other 5%-plus daily advances came immediately in the aftermath of the 1987 crash, when buying did prove a good plan, and two more in March 2009 when the S&P finally hit bottom as the Great Financial Crisis began to abate.

"But history also shows eight of the 5%-plus gains came during the bear market of 2007-2009 and three more during the market downturn of 2000-2003, to suggest there is still a risk that this year’s Boxing Day bonanza could be no more than a wicked bear trap set to lure investors into more trouble."

In corporate news, shares in Teva Pharmaceuticals were likely to rally on news that it has reached a confidential settlement and licensing agreement with drug manufacturer Neos Therapeutics Inc.

On the data front, initial jobless claims are at 1330 GMT, while consumer confidence is at 1500 GMT.