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U.S. stock indexes were headed lower Friday morning after posting fresh record highs this week, as lockdown measures to combat the COVID-19 pandemic in Europe and America take their toll and President Joe Biden’s proposed new round of fiscal stimulus runs into opposition in the Senate.
How are stock benchmarks performing?
- The Dow Jones Industrial Average DJIA, -0.55% was off by about 240 points to reach 30,939, a decline of 0.8%.
- The S&P 500 index SPX, -0.30% traded 19 points lower, or 0.5%, to reach 3,834.
- The Nasdaq Composite Index COMP, -0.16% had pared its decline and was off 36 points, or 0.3%, at 13,492.
On Thursday, the Dow fell 12.37 points, or less than 0.1%, to 31,176.01, the S&P 500 gained 1.22 points, or less than 0.1%, at 3,853.07, narrowly hitting punching out a record closing high, as did the Nasdaq Composite, which climbed 73.67 points, or 0.6%, to reach 13,530.91.
What’s driving the market?
Investors are finding few reasons to buy stocks on Friday after a run-up to records this week, with the acceleration of new coronavirus cases and lockdowns in some European countries and in Asia undermining support for equities.
The global tally for confirmed COVID-19 cases climbed above 97.5 million on Friday, according to data aggregated by Johns Hopkins University, while the death toll rose above 2.09 million.
U.K. Prime Minister Boris Johnson said that the country’s current lockdowns could last into the summer, raising further questions about the economic impact of the outbreak in Europe and the U.S.
In addition, cases of COVID-19 are being reported again in China for the first time in months, with 103 new infections, marking an 11th day with more than 100 confirmed cases, while Hong Kong has seen its first lockdown, just ahead of Lunar New Year festivities, a popular holiday in Asia.
Adding to investor worries, data showed the flash eurozone purchasing managers index dropping in January to a two-month low of 47.5, coming close to the expected 47.6—from 49.1 in December. The European Central Bank on Thursday warned that the eurozone could be headed for a double-dip recession if lockdowns last much longer.
In the U.S., Dr. Anthony Fauci, head of the National Institute of Allergy and Infectious Diseases, returned to the daily White House briefing on Thursday and said that new data shows that vaccines currently on the market may be less effective in battling variants of the coronavirus that causes COVID-19.
However, U.S. stocks came off their session lows after IHS Markit purchasing managers surveys for the service and manufacturing sectors for January posted good results, compared to December. The index for services—by far the largest sector of the economy—rose to a two-month high of 57.5 in January from 54.8 in the prior month, while a survey for the U.S. manufacturing sector climbed to a record 59.1 from 57.1. Both readings suggest that the U.S. economy is getting off to a solid start in 2021.
In housing, U.S. existing home sales in December increased less than 1% to 6.76 million.
Investors are also watching the Biden administration’s approach to the dual public-health and economic crises as well as the impact of the coronavirus on American corporations.
Analysts doubt that a $1.9 billion relief package proposed by Biden will remain intact in the Senate as the new president seeks to gather consensus in Congress on further fiscal spending.
Investors are also concerned that impeachment proceedings in the Senate against former president Donald Trump may delay progress on Biden’s fiscal stimulus bill. The impeachment articles for former President Donald Trump are expected to be delivered to the Senate on Monday. The House voted last week to impeach Trump, his second time, alleging this time that the 45th president incited a mob that stormed the U.S. Capitol on Jan. 6.
On the corporate front, investors were watching corporate quarterly results, with a focus on Intel Corp INTC whose shares slumped early Friday after posting results late Thursday on its plans to address the chipmakers longer term problems.
Also, International Business Machines Corp. IBM on Thursday afternoon reported a decline in adjusted net income for at least the seventh consecutive year, and a step down in sales for the eighth year out of the past nine, according to FactSet records.
Separately, former Federal Reserve Chairwoman Janet Yellen’s nomination for Treasury Secretary, the first woman to hold that position, scored unanimous consent by the Senate Finance Committee and was expected to be confirmed by the full Senate.
Which stocks are in focus?
- Walt Disney Co. DIS, +0.52% was upgraded to buy from neutral at UBS, with the broker lifting its price target on the entertainment giant to $200 from $155. Shares were up 1.8%.
- IBM‘s stock IBM, -10.35% was down nearly 10% after its quarterly update.
- Intel‘s shares INTC, -8.22% were skidding more than 5% lower early Friday.
- Shares of Schlumberger Ltd. SLB, -1.45% were in focus after the oil services company topped profit forecasts, and beat revenue expectations for the first time in four quarters. Shares were off 0.3%.
- Aurora Cannabis Inc.’s ACB, -6.98% $125 million bought-deal financing isn’t surprising, but may not be enough for the Canadian company to establish a needed foothold in the U.S., Jefferies analyst Owen Bennett said Friday. Shares were off 6.9% early Friday.
- Shares of Climate Change Crisis Real Impact I Acquisition Corp. CLII, +58.32% soared nearly 70% after special-purpose acquisition company announced a deal in which EVgo Services LLC will go public. EVgo, which boasts being the “nation’s largest electric vehicle public fast charging network,” said its expects $575 million in proceeds from the merger deal, values the combined company at $2.6 billion.
How are other assets faring?
- The yield on the 10-year Treasury note TMUBMUSD10Y, 1.095% slipped 1.8 basis points to around 1.09%. Yields and bond prices move in opposite directions.
- The ICE U.S. Dollar Index DXY, +0.13%, a measure of the currency against a basket of six major rivals, was up 0.1% on the day but headed for a weekly decline of 0.5%.
- Oil futures traded sharply lower as the spread of COVID-19 in Europe and Asia came into focus, with the U.S. benchmark CL.1, -1.17% 2.7% lower at $51.69 a barrel. Gold futures GC00, -0.66% retreated, with the February contract GCG21, -0.66% falling 1.2% to $1,843 an ounce.
- In Europe, the Stoxx 600 Europe index SXXP, -0.65% traded 0.9% lower, while London’s FTSE 100 UKX, -0.36% was off 0.6%.
- In Asian trade, the Shanghai Composite SHCOMP, -0.40% fell 0.4%, China’s CSI 300 000300, +0.09% closed up less than 0.1%, while Hong Kong’s Hang Seng Index HSI, -1.60% fell 1.6% and Japan’s Nikkei 225 NIK, -0.44% closed 0.4% lower.
