After nine consecutive days of record highs and after closing higher on Wednesday for the ninth time in the past 10 sessions, S&P futures have done something they haven't done in a long time: following a "magical, non-stop rally in stocks continues" as Adam Button of ForexLive dubbed it, futures are down this morning, trading down 0.5% at session lows as of 730am at 3,564, down some 20 points from their all time high hit yesterday.

Chip makers including Nvidia fell in the premarket while banks like JPMorgan Chase and Bank of America on the back of a Deutsche Bank upgrade and as the rotation away from tech stocks looked set to extend. Shares of Apple, Adobe, Nvidia and Netflix, all of which have soared more than 70% this year, slipped about 2% each in premarket trading, following yesterday's declines as the gamma trade appears to be unwinding. Tesla tumbled 6.6%, falling for the third session after announcing a $5 billion stock offering. PVH Corp rose 2.5% after Calvin Klein owner posted a surprise quarterly profit, boosted by strong online demand for comfortable and casual clothing during the coronavirus-led shift to work from home.

"What we are seeing is a little bit of profit-taking now in the big tech sector as people look to rebalance their portfolios going into the last part of this year," Ann Berry, partner at Cornell Capital LLC, said on Bloomberg TV. "Folks are trying to go back to basics a little bit as we continue to see these surges and the topping out in the value of the market right now."

ECB Ready to Adjust All Instruments: Chief Economist Lane

The perplexing decline in Emini futures took place even as European shares jumped the most in a month on the back of continued EURUSD weakness (the pair dipped to 1,1790 after hitting 1.20 two days ago) and after France introduced new stimulus measures to drive the economy and spur job creation.

France plans to spend €100 billion to pull its economy out of a deep coronavirus-induced slump, signalling renewed efforts by President Emmanuel Macron to push through a pro-business reform agenda. The stimulus equates to 4% of GDP, meaning France is plowing more public cash into its economy than any other big European country as a percentage of GDP, an official said ahead of its formal launch later on Thursday. France’s recession, marked by a 13.8% second quarter GDP contraction that coincided with the country’s COVID-19 lockdown and is set to generate an 11% drop in 2020 as a whole, has also been one of Europe’s deepest.

As a result, France’s CAC 40 Index surged as much as 2% amid a broad rally in Europe that showed the stock market advance is continuing to expand beyond the tech sector, while the euro dipped for a third day on signals the European Central Bank is concerned about the currency’s strength (see "With A Record Number Of Bulls, The Euro Is Ripe To Tumble After "Euphoric Run"). Meanwhile, the French Service PMI dipped from 51.9 in July to 51.5 in August, missing expectations of 51.9, even as Germany posted a modest beat (51.9 vs exp. 51.6, last 51.6).

The Stoxx 600 Travel & Leisure Index climbed to the highest since June 10, while the Auto & Parts Index reaches best level since June 8, amid optimism surrounding the quest for a Covid-19 vaccine, fresh economic stimulus in France, and a weaker euro boosting exporters. SXTP up 2.7% leading the Stoxx 600; IAG (+6%), Carnival (+5.7%) and Easyjet (+5.7%) lead SXTP; Peugeot (+4.9%), Renault (+4.8%), Fiat Chrysler (+3.8%) lead SXAP; The first results showing whether a vaccine can stop people from getting the virus could come by mid-September from AstraZeneca, according to Airfinity, an analytics company that tracks drug trials, while two other contenders may also have initial data before a key FDA meeting on Oct. 22

Earlier in the session, Asian stocks were little changed, with energy falling and IT rising, after rising in the last session. Markets in the region were mixed, with South Korea's Kospi Index and Australia's S&P/ASX 200 rising, and Jakarta Composite and Shanghai Composite falling. The Topix gained 0.5%, with Fukushima Bank and Solxyz rising the most. China's Shanghai Composite Index retreated 0.6%, with Bohai Ferry Group Ltd and Jilin Forest Ind posting the biggest slides.

Global stock have been rising on continued central bank stimulus as well as renewed hopes for a coronavirus vaccine, fueling a catch-up trade in markets that had lagged the U.S. The S&P 500 jumped 1.5% yesterday to hit another record and Japanese stocks are trading at the highest since February. Data on Thursday is likely to show the number of Americans filing for weekly jobless claims remained elevated in the latest week, but dipped below the 1 million mark. Separately, reading on ISM’s services index probably edged lower to 57 in August from 58.1. The critical monthly payrolls report by the Labor Department is set for release on Friday. Signs that the U.S. economic recovery is faltering has raised concerns about depleting federal aid. At the same time, investors are hopeful that the next fiscal coronavirus relief bill could be unveiled in the coming days.

“Markets continue to show unrestrained faith in the capacity of central bank liquidity to chart a relatively smooth path for the global economy out of the Covid challenges,” said Stephen Miller, investment strategist at GSFM.

The U.S. Centers for Disease Control and Prevention - after halting eviction - told states to prepare for a Covid-19 vaccine to be ready by Nov. 1, an aggressive goal that suggests availability just before the presidential election.  Anthony Fauci warned of a potential surge in American cases from the coming long holiday weekend.

In FX, the dollar rose against G-10 peers, with the Bloomberg Dollar Spot Index climbing a third day. The euro headed for the biggest three-day decline since June following signals that the ECB is concerned about the strength of the common currency. The pound dropped a second day against the greenback. Norway’s krone and the New Zealand dollar led losses among G-10 currencies.

In rates, Treasury yields were little changed across a steeper curve, off session highs reached during European morning. Yields were cheaper by less than 1bp across the curve, with 2s10s and 5s30s curves marginally steeper; 10-year yields around 0.655% with bunds outperforming and gilts lagging, each by ~1bp. At 11am, the Treasury Department will announce sizes of next week’s three coupon auctions; based on its forecasts in Aug. 5 refunding announcement, expectation is for $50b 3-year new issue (vs $48b last month), $35b 10-year reopening (vs $29b in previous cycle) and $23b 30-year reopening (vs $19b).

In commodities, WTI and Brent continued to drift lower, with Brent down more than 1%, partly weighed on by the firmer USD, while traders kept an eye on the supply side of the equation as Gulf of Mexico production comes back online, while comments from Russian Energy Minister Novak yesterday, regarding oil demand at ~90% of pre-pandemic levels and calling on OPEC to take this into account, hinted at a potential proposal of early tapering of the OPEC+ output curbs. Gold dropped for the third day on the back of continued dollar strength, further decoupling from real rates.

Looking at the day ahead, the ISM services index from the US will be the highlight, as well as the weekly initial jobless claims and the July trade balance from the US. Central bank speakers today include BoE Governor Bailey as well as Deputy Governor Ramsden, along with the ECB’s Schnabel and the Fed’s Evans. Campbell Soup, Ciena, Broadcom and DocuSign are among companies reporting earnings.

Market Wrap

• S&P 500 futures down 0.1% to 3,575.50
• STOXX Europe 600 up 1.1% to 375.28
• MXAP up 0.08% to 174.30
• MXAPJ down 0.1% to 577.19
• Nikkei up 0.9% to 23,465.53
• Topix up 0.5% to 1,631.24
• Hang Seng Index down 0.5% to 25,007.60
• Shanghai Composite down 0.6% to 3,384.98
• Sensex up 0.02% to 39,093.85
• Australia S&P/ASX 200 up 0.8% to 6,112.61
• Kospi up 1.3% to 2,395.90
• German 10Y yield rose 0.5 bps to -0.468%
• Euro down 0.3% to $1.1823
• Italian 10Y yield fell 6.3 bps to 0.846%
• Spanish 10Y yield rose 1.5 bps to 0.346%
• Brent futures down 1.4% to $43.81/bbl
• Gold spot down 0.4% to $1,934.71
• U.S. Dollar Index little changed at at 92.87