30 Jan Market Snapshot: Stocks set to hit pause after record run, as investors search reasons to buy
U.S. stock-index futures pointed to a flat open on Monday, as investors found few reasons to keep pushing shares higher following a four-day rally that has taken Wall Street to repeated records.
Traders also absorbed recent comments from Federal Reserve officials, who hinting at the potential for more increases to interest rates in 2018 than the three currently priced in to the market on the back of a strengthening U.S. economy and fiscal stimulus.
What are stock futures doing?
Futures for the Dow Jones Industrial Average YMH8, -0.04% slipped 1 point, or less than 0.1%, to 25,267, while S&P 500 index futures ESH8, -0.13% fell 3 points, or 0.1%, at 2,739. Nasdaq-100 futures NQH8, -0.12% eased 8.5 points, or 0.1%, at 6,659.
All three major U.S. equity benchmarks posted record gains on Friday, finishing the first week of the new year with solid gains. The S&P 500 index SPX, +0.70% and the Nasdaq Composite Index COMP, +0.83% each a logged fourth-straight closing record Friday, while the Dow DJIA, +0.88% snared a 220-point gain for its third record in a row.
In addition, the broad-based Dow closed at a record on the first four trading days of the new year, the first time since 1964, according to WSJ Market Data Group.
What’s driving the market?
A positive view for stocks that persisted in 2017 has continued into early 2018, despite Monday’s muted action. The recently passed tax package in the U.S. is seen as a contributing factor, as are higher commodity prices and a run of solid economic data.
On Friday, Cleveland Fed President Loretta Mester told Reuters that she sees a strong U.S. economy as helping to make the case for four interest rate increases in 2018. In a separate interview with Reuters on Saturday, San Francisco Fed President John Williams said the central bank should lift interest rates three times this year, because of the lift tax cuts will provide.
“We’re in a pretty good situation: the economy is doing great, everyone expects us to raise rates gradually…and if the data change we can respond to that,” said Williams, who added that he wasn’t concerned about a sudden jump in inflation.
Upbeat corporate results are said to have been a driver as well, and investors will watch for fourth-quarter earnings from big banks, which will kick off fourth-quarter earnings season this week. JPMorgan Chase & Co. JPM, -0.64% BlackRock Inc BLK, +0.85% and Wells Fargo & Co. WFC, +0.67% are all scheduled to release reports on Friday. The results will provide insight into the state of American corporations in the current economic environment, as well as possibly giving some clarity into what impact the recently pass tax reform legislation could have on profits.
What are strategists saying?
J.J. Kinahan, chief market strategist at TD Ameritrade, suggested that many investors were waiting for the start of the earnings season before making big bets. “The multinational financial companies reporting on Friday really do set the trend. What they say about growth in the U.S. and world wide can give you a handle on what to expect from other companies,” he said.
For 2018, Kinahan said he saw inflation and the reduction of the Federal Reserve’s balance sheets as risks, although he remained fundamentally optimistic about stocks. “There’s a reason we’ve had this incredible run,” he said.
What economic news is ahead?
An update on consumer credit is the only major data release on the calendar for Monday, with the November report due at 3 p.m. Eastern Time.
Atlanta Fed President Raphael Bostic due to speak on the economic outlook and monetary policy at the Rotary Club of Atlanta at 12:40 p.m. Eastern.
Boston Fed President Eric Rosengren will take part in a panel discussion on whether Fed should stick to a 2% inflation target on Monday afternoon.
Which stocks are in focus?
Nvidia Inc. NVDA, +0.85% shares rose 2.4% in thin premarket trading. At a pre-CES news conference in Las Vegas on Sunday, the chip maker announced a partnership with Uber Inc. to provide the ride-hailing company with self-driving hardware.
Shares of Celgene Corp. CELG, -1.58% rose 1.8% in premarket after the biotech group announced a deal to buy blood-disease biotechnology company Impact Biomedicines for as much as $7 billion.
GoPro Inc. GPRO, -0.66% gave a fourth-quarter revenue forecast that was sharply below analyst expectations. The stock was halted in premarket trading.
Dave & Buster’s Entertainment Inc. PLAY, -1.74% tumbled in premarket trading after the company cut its 2017 profit and sales outlook.
What are other markets doing?
Asian markets continued to rally, with Taiwanese stocks soaring to a 28-year high, but with Japanese markets closed for a holiday. In Europe, the Stoxx Europe 600 index SXXP, +0.27% was posting modest gains.
In cryptocurrencies, bitcoin futures BTCF8, -10.43% on the CME fell to $15,320 from Friday’s settlement of $16,590. That is after bitcoin spot prices topped $17,000 over the weekend, although they have pulled back Monday. Ether coins on the Ethereum blockchain tapped a new all-time high atop $1,200 on Monday, but are now lower, according to CoinDesk.