The Tuesday Market Minute
- Global stock mixed as investor focus shifts to U.S. earnings parade while possible delays to Biden‘s stimulus bill prompt cautions trades in bonds and the dollar.
- Senate focus on Trump impeachment could push stimulus negotiations into March, while Biden claims he’s “open to negotiating” terms of the $1.9 trillion package.
- Janet Yellen confirmed as first woman Treasury Secretary by the Senate in an 84-15 vote late Monday.
- S&P 500 earnings highlight a busy week on Wall Street, with 120 companies reporting including Microsoft, Starbucks and AMD after the close of trading.
- GameStop extends surge, with Blackberry and AMC Entertainment rising higher, as retail investors continue to push favored stocks to multi-year highs.
- U.S. equity futures suggest a mixed open on Wall Street after quarterly updates from Johnson & Johnson, General Electric, 3M and Verizon.
Wall Street futures traded mixed Tuesday, while the dollar rallied alongside Treasury bonds, as investors adopted a cautious stance on risk markets heading into the busiest stretch of the quarterly earnings season.
Better-than-expected earnings from Johnson & Johnson (JNJ) – Get Report, General Electric (GE) – Get Report and 3M (MMM) – Get Report gave the Dow a boost, but sentiment was largely tamed by comments from President Joe Biden, who told reporters in Washington yesterday that he was “open to negotiating” terms of his $1.9 trillion coronavirus relief plan amid pushback from Republican lawmakers in the 50/50 split Senate.
Moves by Democratic lawmakers to bring impeachment proceedings against Donald Trump, as well, could command weeks of the Senate’s time and delay the passage of the bill until mid-March, some reports have suggested, leaving the economy to sputter with steepening job losses and slower consumer spending.
That would likely compel the Federal Reserve to at least reiterate its commitments to near-zero interest rates and billions in monthly bond purchases until at least the end of the year, if not beyond, as it begins its two-day policy meeting in Washington.
In the meantime, a host of corporate earnings, both before and after the bell, will likely dictate trading over the next few days, with updates expected from Verizon Communications (VZ) – Get Report and Lockheed Martin (LMT) – Get Report prior to the start of trading.
Johnson & Johnson (JNJ) – Get Report topped Wall Street forecasts for its fourth quarter earnings, with an adjusted bottom line of $1.86 per share on revenues of $22.5 billion, and hinted it will update on progress in its coronavirus vaccine development in the coming days amid questions as to whether AstraZeneca ((AZN)) – Get Report will get clearance for its candidate from health officials in Europe and the United States.
GE posted weaker-than-expected fourth quarter earnings of 8 cents per share, but forecast solid industrial free cash flow of between $2.5 billion and $4.5 billion for the coming year, sending its shares 6.3% higher higher in pre-market trading.
Collective S&P 500 earnings are expected to decline 5.7% from last year to a share-weighted $324.8 billion, according to data from Refinitiv, before rebounding 18.1% over the first three months of the year.
Futures contracts tied to the Dow Jones Industrial Average suggest a modest 105 point opening bell decline, while those linked to the S&P 500 suggest a 10 point bump. Nasdaq Composite futures are indicating a 20 point gain at the open for the tech-focused benchmark.
Two notable movers from yesterday’s session — GameStop (GME) – Get Report and AMC Entertainment Holdings (AMC) – Get Report — were back on the rise in pre-market trading Tuesday, with the video game retailer rising 18.4% to indicate an opening bell price of $90.90 each and the world’s biggest movie theatre chain rising 17.2% to $5.18 each.
Both stocks, as well as BlackBerry Ltd (BB) – Get Report, have been the subject of intense retail investor focus over the past few sessions, with hundreds of millions of shares changing hands amid limited information flows, a condition that ignites concern for the state of risk tolerance in a market that is well ahead, in terms of performance, than the underlying economy it is ostensibly meant to represent.
A further reflection of that caution came from the CBOE’s key indicator of equity volatility, the VIX, which was marked 7.5% higher and marked at a two-week high of 23.47 points in extended trading.
Elsewhere, The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.1% higher on the session at 90.466, while benchmark 10-year Treasury note yields slipped to 1.048% in the cautious overnight session.
In Europe, better-than-expected earnings from Swiss bank UBS, as well as well as the German chemical group Linde, powered the region-wide Stoxx 600 to an early 0.7% gain, with Germany’s DAX performance index rising 1.4% in Frankfurt.
Overnight in Asia, stocks slumped the most in nearly two months amid questions over the size and timing of the U.S. stimulus package as well as the worrying rise of coronavirus infections in some of the region’s largest economies more than a year after it was first identified in the central industrial city of Wuhan.
Japan’s Nikkei 225 closed 0.96% lower at 28,546.18 points while the region-wide MSCI ex-Japan index was marked 1.67% lower heading into the final hours of trading.