Wednesday January 5th


Stock futures little changed after the Dow notches a record close

U.S. stock index futures were mixed in early morning trading Wednesday after the Dow Jones Industrial Average notched a record close the previous day as investors flocked to shares that stand to benefit from an economic recovery. Futures on the blue-chip Dow and the S&P 500 were flat, while Nasdaq 100 futures moved 0.3% lower. Early losers included Dow component Salesforce, which fell more than 2% in premarket trading following a downgrade from UBS, which also cut Adobe, sending its shares down 1.8%. Markets also faced pressure from stocks associated with the economic reopening: Wynn Resorts fell 2%, while Las Vegas Sands was off 1.5%. With Covid cases rising, pharma companies were under pressure, with Regeneron down 3% following a downgrade from Bank of America. Bank of America gave an upgrade to Pfizer, however, noting that the company’s profits from Covid treatments provide upside for the stock. Shares moved 1.7% higher in premarket trading. ADP reported Wednesday that private job growth totaled 807,000 in December, more than double the Dow Jones estimate of 375,000. The data in the report covers only through the middle of December, however, which was before the height of the escalation in Covid cases and concerns. Investors looking for clues on where the economy stands heading into the new year also awaited Friday’s more closely watched nonfarm payrolls count, which is expected to show a gain of 422,000. They’re also awaiting the release Wednesday of minutes from the December Federal Reserve meeting. Policymakers decided then to accelerate the pace of the monthly bond buying taper and indicated that three quarter-percentage-point interest rate hikes are coming in 2022. They also adjusted their outlook on inflation and economic growth. However, the market will be seeking additional information on where officials see policy heading, particularly on what will happen with the Fed’s nearly $9 trillion balance sheet. The Dow and S&P are higher for the first week of 2022, so far, though the tech-heavy Nasdaq Composite took a turn with the move in bond yields. The closely-watched benchmark 10-year Treasury yield jumped as high as 1.71% Tuesday, triggering a sell-off in growth-oriented technology stocks, which initially led market gains to start the week. That pushed the Nasdaq down 1.3%. Megacap tech stocks underperformed the S&P 500 Tuesday as “investors reconsidered the value of such long-duration assets in the wake of higher rates,” Chris Hussey, a managing director at Goldman Sachs, said in a note. “The Fed is accelerating its removal of liquidity because inflation has broadened, which has the potential to push 10-year yields higher,” Ed Al-Hussainy, senior rates strategist at Columbia Threadneedle, said in a note. “But the central bank must be careful not to act too aggressively, which could derail the economic recovery and cause a recession.” Wall Street strategists are expecting a bumpier road ahead for the stock market as the Fed begins to tighten its ultra-easy monetary policy. The median year-end target for the S&P 500 now stands at 5,050, only a 5% gain from Tuesday’s close of 4,793.54, according to CNBC’s Strategist Survey. Shares in Asia-Pacific were largely lower on Wednesday, as technology stocks in the region came under pressure amid rising U.S. bond yields. In the broader Asia-Pacific markets, Hong Kong’s Hang Seng index closed 1.64% lower at 22,907.25. The Shanghai composite in mainland China dipped 1.02% to close at 3,595.18 while the Shenzhen component fell 1.795% to 14,525.76. Over in South Korea, the Kospi dropped 1.18% on the day to 2,953.97. Elsewhere, the Nikkei 225 in Japan closed 0.1% higher at 29,332.16 while the Topix index climbed 0.45% to 2,039.27. Oil prices held near $80 a barrel on Wednesday after OPEC+ producers stuck to an agreed output target rise for February and investors assessed the impact of a spike in Covid-19 cases caused by the omicron variant. Brent crude futures were up 37 cents, or 0.46%, to $80.37 a barrel by 7:10 a.m. ET, while U.S West Texas Intermediate (WTI) crude futures rose 29 cents, or 0.38%, to $77.28. Gold was flat in early Asian trade on Wednesday, as traders weighed prospects of early interest rate increases by the U.S. Federal Reserve against surging COVID-19 infections globally. Spot gold was little changed at $1,813.91 per ounce by 0133 GMT. U.S. gold futures were flat at $1,813.80.