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Stock-index futures lost ground Friday morning after President-elect Joe Biden announced a $1.9 trillion COVID-19 relief plan late Thursday and investors prepared for the kickoff of the corporate earnings season, with results due from a trio of big banks.
What are major benchmarks doing?
- Futures on the Dow Jones Industrial Average YM00 fell 133 points, or 0.4%, to 30,776.
- S&P 500 futures ES00, -0.48% were off 15.45 points, or 0.4%, at 3,775.75.
- Nasdaq-100 futures NQ00, -0.14% declined 28.25 points, or 0.2%, to 12,872.75.
Stocks gave up early gains to end slightly lower Thursday, with the Dow DJIA, -0.22% falling 68.95 points, the S&P 500 SPX, -0.38% down 0.4% and the Nasdaq Composite COMP, -0.12% losing 0.1%. The small-cap Russell 2000 RUT, +2.05% rose sharply, however, gaining 2.1%. Thursday marked the first time the Russell rose more than 2% on the same day the DJIA, Nasdaq Composite, and S&P 500 closed lower, according to Dow Jones Market Data, citing records going back to1986.
What’s driving the market?
Biden on Thursday evening outlined a coronavirus relief plan with a price tag of $1.9 trillion, including $1,400 cash payments to households, supplemental unemployment payments, and money for distributing COVID-19 vaccines.
“The price action has all the feel of sell-the-news dynamic as risk assets rallied strongly in anticipation of the news and now appear to have stalled as traders look for fresh catalysts to drive price action,” said Boris Schlossberg, managing director at BK Asset Management, in a note.
Worries over the potential for tax increases could limit upside also after the market’s strong run-up in anticipation of the package, analysts said.
“Biden suggested that closing tax loopholes can do a lot of the work to repair government finances, but higher corporate, income, and capital-gains taxes are inevitable at some point for an economy that has a national debt well in excess of 100% of GDP,” said James Knightley, chief international economist at ING, in a note.
Corporate earnings season began in earnest Friday, with shares of JPMorgan Chase & Co. JPM edging lower in premarket trade after reporting earnings and revenue that topped consensus expectations. Results ahead of the opening bell were also due from Citigroup Inc. C, +3.22% and Wells Fargo & Co. WFC, +2.81%.
See: Banks are back — almost half of 15 large U.S. banks are expected to increase quarterly profit
For earnings season overall, Mark Haefele, chief investment officer at UBS Global Wealth Management, said he was maintaining a bias for cyclical companies, or those that are most sensitive to changes in the economic cycle, as the economy reopens.
Also read: Expect another quarter of big earnings beats, as Wall Street estimates were likely overly depressed
“Our favored sectors are consumer discretionary, financials, health care, and industrials,” he said, in a note. “We believe small- and midcaps have more upside potential as their earnings growth should outpace large-caps amid normalizing economic activity.”
U.S. economic data include December retail sales figures at 8:30 a.m. Eastern, which are expected to fall 0.1% after a 1.1% fall in November. Economists surveyed by MarketWatch expect sales, excluding autos, to fall 0.4%.
Also due at 8:30 a.m. ET, the December producer price index is expected to show a 0.4% rise after a November increase of 0.1%. And the New York Federal Reserve Bank’s Empire State Index for January is forecast to rise to 6.0 from 4.9.
December industrial production and capacity utilization figures are due at 9:15 a.m. Production is forecast to rise 0.4%, while utilization is seen edging up to 73.7% from 73.3% in November.
A preliminary January consumer sentiment reading and November business inventories data is due at 10 a.m.
