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Investing.com – The Dow snapped a three-week winning streak Friday, paced by a decline in financials as Wall Street banks delivered mixed quarterly results, while the signs of a slowdown in the recovery prompted traders to keep their powder dry.
The Dow Jones Industrial Average fell 0.57%, or 177 points. The S&P 500 was down 0.71%, while the Nasdaq Composite slipped 0.87%.
Financials were among the biggest decliners, led by a drop in banking stocks after JPMorgan, Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC) reported mixed quarterly results.
JPMorgan Chase (NYSE:JPM) fell 2% despite reporting fourth-quarter results that topped expectations. Wells Fargo and Citigroup missed quarterly revenue estimates, but beat expectations on the bottom line. Shares fell more than 6% and 7%, respectively.
The start of earnings season will also provide investors with clues of the impact on Corporate America in the wake of a slowing recovery.
Retail sales fell by a more than expected 0.7% in December, marking the third straight month of losses.
“Total sales in 2020 were up only 0.6% from 2019, the slowest pace in retail activity since the last recession in 2009,” said Yelena Maleyev, Economist at Grant Thornton.
The U.S. economic slowdown could suffer a further hit as fears mount that more restrictive lockdown measures to curb the virus loom after the CDC warned that highly contagious Covid-19 variant identified in the U.K. could become the dominate strain in the U.S. if there are no measures to slow the spread.
Still, further fiscal help to stem the pandemic blow to the economy could be one the way.
Biden unveiled Thursday plans for a $1.9 trillion stimulus package that includes “another round of direct payments of $1,400 per qualifying person, enhanced federal unemployment benefits to $400 per-week through the end of September, and an increase in the federal minimum wage to $15 per hour,” Stifel said.
Biden also bandied a follow-up recovery package focused on infrastructure and climate change – expected to be unveiled in the coming weeks – that will likely be funded by tax hikes.
The risk of higher taxes has not been fully priced in, said Derek Holt, Vice-President of Scotiabank Economics. “My personal belief remains that markets have been sleep walking through the tax policy risk out of the U.S.” Holt added. Biden will likely resort to playing one or two of his two 2021 budget reconciliation cards to push taxes through if he fails to get win support from GOP senators. But while that “could still cost Biden in the November 2022 mid-terms … he may be thinking he’d better get it all done sooner than later.”
Energy, meanwhile, fell more than 2% but is set to end week higher amid gains earlier this week as investors expect oil prices to continue their advance.
Exxon Mobil (NYSE:XOM) fell 5% after the SEC reportedly launched an investigation into how the oil major valued a key asset in the oil rich Permian Basin, according to The Wall Street Journal.
In other news, Poshmark (NASDAQ:POSH) gave up some of its public-debut gains from a day earlier, falling 19%, but remained above its IPO price of $42 per share.
