Friday January 15th

15-01-2021

Stock futures slide as earnings season kicks off, Biden unveils $1.9 trillion stimulus plan

U.S. stock index futures fell on Friday as President-elect Joe Biden announced details of a $1.9 trillion stimulus plan and major banks got set to release their quarterly results, kicking off the earnings reporting season. Futures contracts tied to the Dow Jones Industrial Average fell 127 points or 0.4%. Futures for the S&P 500 shed 0.4%. Nasdaq 100 futures lost 0.3%. The market was expecting a sizable stimulus from Biden, with the S&P 500 up 9% in the last three months and rates on the rise. Biden’s proposal, called the American Rescue Plan, includes increasing the additional federal unemployment payments to $400 per week and extending them through September, direct payments to many Americans of $1,400, and extending the federal moratoriums on evictions and foreclosures through September. The plan also calls for $350 billion in aid to state and local governments, $70 billion for Covid testing and vaccination programs and raising the federal minimum wage to $15 per hour. “There is real pain overwhelming the real economy — the one where people rely on paychecks, not investments, to pay for their bills and their meals and their children’s needs,” Biden said during a speech in Delaware Thursday night. On Friday, investors will get fresh looks at major banks as Wells Fargo, Citigroup and JPMorgan Chase report their fourth-quarter earnings. JPMorgan was out first and the shares were slightly higher as the bank’s earnings topped expectations on solid trading and fewer credit losses than feared. Shares of Citigroup dipped in the premarket despite beating analysts’ estimates for profit. Both Citigroup and JPMorgan released cash reserves for loan losses. Savita Subramanian, Bank of America’s head of U.S. equity strategy, said on CNBC’s “Fast Money” that the additional government spending is part of the reason that the market leadership could shift from tech stocks to cyclical stocks in 2021. “We’ve got this petri dish where everything that was good for tech and secular growth is starting to change,” Subramanian said. The announcement comes after a quiet day on Wall Street, where the three major indexes finished with slight losses after tech stocks faded late in the session. Anticipation of the stimulus deal was reflected in other areas, however, as the more economy dependent Russell 2000 rose more than 2%. A third major relief bill has been widely expected in recent weeks, especially after the December labor market report saw the economy lose jobs and Democrats won two key Senate races in Georgia, giving Biden’s party narrow control of both houses of Congress. Another spending bill, focused on climate change and infrastructure among other initiatives, is expected to be introduced in February, according to senior Biden officials. It remains unclear whether Biden’s proposal will be welcomed in a sharply divided Congress. Though Democrats hold both houses, they will need to sway moderate members of their own party, such as West Virginia Sen. Joe Manchin, and some Republicans to increase spending. Democrats originally pushed for another multi-trillion package last year before agreeing to a $900 billion bill in December. There will also be new data on retail sales and inflation. Shares of Chinese smartphone maker Xiaomi plunged on Friday trade after U.S. President Donald Trump’s administration placed the firm on a blacklist of alleged Chinese military companies. By Friday’s close in Hong Kong, shares of Xiaomi listed in the city dived 10.26%. The broader Hang Seng Tech index also fell 1.35% to 8,775.54, while the benchmark Hang Seng index was 0.27% higher at 28,573.86. Elsewhere, shares in Asia-Pacific were mostly lower on Friday. South Korea’s Kospi led losses as it fell 2.03% to close at 3,085.90. Mainland Chinese stocks were mixed on the day: The Shanghai composite was little changed at 3,566.38 while the Shenzhen component dipped 0.255% to 15,031.70. In Japan, the Nikkei 225 shed 0.62% to close at 28,519.18 while the Topix index slipped 0.89% to finish its trading day at 1,856.61. Oil prices were lower on Friday as concerns about Chinese cities in lockdown due to coronavirus outbreaks tempered a rally driven by strong import data from the world’s biggest crude importer and U.S. plans for a large stimulus package. Brent was down 46 cents, or 0.8%, at $55.96 by 0544 GMT, after gaining 0.6% on Thursday. U.S. West Texas Intermediate crude was 29 cents, or 0.5%, lower at $53.28 a barrel, having risen more than 1% the previous session. Brent is heading for the first weekly decline in three weeks, while U.S. crude is on track for a third weekly gain. Gold rose on Friday on fresh coronavirus-led lockdowns in Europe and on dovish policy cues from the U.S. Federal Reserve. Spot gold was up 0.4% at $1,853.81 per ounce, putting it on course for a small weekly gain, while U.S. gold futures rose 0.1% to $1,853.80.