Friday January 22nd


Stocks are set to retreat from records to end the week, Dow futures drop 250 points

U.S. stock index futures fell early Friday morning with the S&P 500 and Nasdaq Composite set to retreat from records, as investors reassessed the outlook for President Joe Biden’s ambitious Covid stimulus plan. Dow Jones Industrial average futures dropped 250 points, or 0.8%, while S&P 500 futures fell 0.8%. Nasdaq 100 futures lost 0.6%. The Nasdaq Composite and S&P 500 each reached record closing highs on Thursday. The Dow set a record earlier in the week. Shares of IBM fell more than 7% in premarket trading after the company reported fourth-quarter sales below where analysts were expecting. Revenue fell 6% on an annualized basis, the fourth consecutive quarter of declines. Intel shares retreated 4% following a 6% pop on Thursday after it released better-than-expected earnings just before the closing bell. A growing number of Republicans have expressed doubts over the need for another stimulus bill, especially one with a price tag of $1.9 trillion proposed by Biden. Meanwhile, Democratic Sen. Joe Manchin has criticized the size of the latest round of proposed stimulus checks. Dissent from either party carries weight for Biden, who took office with a slim majority in Congress. “The political reality of Washington is starting to impact markets, and it’s becoming more unclear when Democrats’ ambitious stimulus goals will become law,” said Tom Essaye, founder of Sevens Report. Cyclical sectors, those would benefit the most from additional stimulus, have been lagging the broader market this week. Energy and financials have both lost more than 1% week to date, while materials are also down. Tech companies, which largely don’t need a stimulus to spark growth, led the charge. Hopes for a robust earnings season from the country’s largest communications and tech stocks have kept the mega-cap stocks trending upward this week, and the major indexes near records, during the holiday-shortened week. Apple and Facebook have risen 7.7% and 8.6%, respectively, this week ahead of their quarterly results, while Microsoft has gained 5.8%. With the S&P 500 up another 2% this year and up 16% over the last 12 months, some investors believe the market may be getting ahead of itself as hiccups with the vaccine rollout and economic reopening remained likely going forward. The S&P 500 is up 2.3% for the week so far. The Dow is up 1.2% and the Nasdaq Composite is up 4%. Meanwhile, the Senate is expected on Friday to overwhelmingly confirm former Fed Chair Janet Yellen as Biden’s Treasury secretary. If confirmed, she would be the first woman to lead the department. Stocks in Asia-Pacific fell on Friday, as shares of oil giant CNOOC in Hong Kong saw heavy losses. The broader Hang Seng index in Hong Kong fell 1.6% on Friday to close at 29,447.85. Mainland Chinese stocks closed mixed, with the Shanghai composite down 0.4% to 3,606.75 while the Shenzhen component rose 0.697% to 15,628.73. In Japan, the Nikkei 225 slipped 0.44% to close at 28,631.45 while the Topix index shed 0.21% to finish its trading day at 1,856.64. South Korea’s Kospi declined 0.64% to close at 3,140.63. Oil prices dropped on Friday, retreating further from 11-month highs hit last week, weighed down by worries that new pandemic restrictions in China will curb fuel demand in the world’s biggest oil importer. U.S. West Texas Intermediate (WTI) crude futures dropped $1.38, or 2.6%, to trade at $51.75 per barrel, after slipping 18 cents on Thursday. Brent crude futures fell $1.31, or 2.34%, to $54.79 per barrel, erasing a 2 cent gain on Thursday. Gold prices fell on Friday as U.S. Treasury yields and the dollar held firm, although expectations of a big U.S. fiscal stimulus kept bullion on course for its biggest weekly gain in five. Spot gold fell 0.9% to $1,854.02 per ounce, retreating from its highest since Jan. 8 hit on Thursday. U.S. gold futures eased 0.5% to $1,855.90.