Tuesday January 26th


Stock futures rise slightly amid a busy day of corporate earnings

U.S. stock index futures rose slightly Tuesday as Wall Street geared up for the heart of corporate earnings season. Futures contracts tied to the Dow Jones Industrial Average added 98 points, or 0.3%. S&P 500 futures were up by 0.2%. Nasdaq 100 futures traded flat. The move in futures followed a volatile day in Wall Street which saw the S&P 500 rise 0.4% to a new record high after being down more than 1% earlier in the session. The Nasdaq Composite also set a new record at 0.7%, while the Dow Jones Industrial Average slipped 37 points, or 0.1%. Monday’s session was marked by wild swings in heavily shorted stocks, including GameStop and AMC Entertainment, as enthusiastic retail investors active in chat rooms bet against short-selling hedge funds. The volatility has some investors concerned about stocks becoming detached from fundamentals as speculation runs rampant. GameStop was up another 14% in premarket trading on no news. “The short squeeze/volatility we saw in heavily-shorted stocks such as GameStop and others yesterday only further confirms that, at least in the near term, complacent/frothy investor sentiment is the biggest near-term risk to stocks,” Tom Essaye, founder of Sevens Report, said in a note Tuesday. Tuesday brings the corporate earnings of larger companies with more impact on the market indexes. General Electric shares jumped 9% in premarket trading on its better-than-expected industrial free cash flow for the fourth quarter and a rosy outlook for the year. Johnson & Johnson were slightly higher after the drugmaker’s earnings topped expectations. Tech giant Microsoft will announce its fiscal second-quarter earnings after the bell. BTIG chief equity and derivative strategist Julian Emanuel said on CNBC’s “Fast Money” that the market’s move higher over the past several weeks and high level of bullish options buying may make it hard for earnings reports to fuel another leg higher. “This is the kind of setup that’s poised for disappointment,” Emanuel said, citing struggles for some other stocks despite earnings beats earlier in the season. However, the strategist also said that the recent frothy trading may not have reached its peak and could push the broad market indexes even higher. On the Covid-19 front, health officials and policymakers continued to caution the public about new strains of the virus. Moderna said Monday that its vaccine does provide some protection against a variant found in South Africa, while officials in Minnesota reported the first U.S. confirmed case of a strain found in Brazil. Investors are also waiting for results from other major tech companies and a new policy statement from the Federal Reserve. The central bank begins its two-day meeting on Tuesday. Former Fed Chair Janet Yellen was confirmed as Treasury secretary, becoming the first woman to hold the position. Stocks in Asia declined in Tuesday trade, with Chinese stocks leading losses among the region’s major markets. The Hang Seng index in Hong Kong dropped 2.55% to close at 29,391.26. Mainland Chinese stocks were lower on the day, with the Shanghai composite down 1.51% to 3,569.43 while the Shenzhen component fell 2.277% to 15,352.42. South Korea’s Kospi closed 2.14% lower at 3,140.31. In Japan, the Nikkei 225 slipped 0.96% to finish its trading day at 28,546.18 while the Topix index closed 0.75% lower at 1,848. Oil prices fell on Tuesday as fading hopes for a rapid approval of new U.S. economic stimulus and mounting new coronavirus cases raised questions over the pace of any recovery in demand. Brent crude was down 28 cents, or 0.5%, at $55.60 by 0431 GMT, while U.S. crude fell 25 cents, or 0.5%, to $52.52. Both rose nearly 1% on Monday. Gold fell on Tuesday as a slightly firmer dollar and uncertainty over a U.S. stimulus package kept bullion under pressure, with investors awaiting cues on future monetary policy decisions from the U.S. Federal Reserve. Spot gold fell 0.2% to $1,852.10 per ounce. U.S. gold futures was down 0.1% to $1,852.70.