Market Watch: Investors Eye Economic Data and Policy Shifts
As the new year unfolds, Wall Street’s main indexes are poised to open higher, driven by anticipation of upcoming economic data and potential policy changes under the incoming Trump administration. With Dow E-minis up 140 points, or 0.33%, S&P 500 E-minis up 21.75 points, or 0.37%, and Nasdaq 100 E-minis up 101 points, or 0.48%, investors are keeping a close eye on the market.
A Rocky Start to the Year
Despite historical trends suggesting a rally in the last five sessions of December and the first two sessions of January, Wall Street had a dismal start to the new year. The S&P 500 and Nasdaq erased early gains to close lower for a fifth straight session on Thursday, with the benchmark S&P 500 and blue-chip Dow on track for weekly declines of over 1% each. The tech-heavy Nasdaq has logged a drop of about 2%, with technology stocks taking the heaviest beating.
Uncertainty Surrounds Trump’s Policies
Analysts attribute the market’s uncertainty to the unknown policies that President-elect Donald Trump’s administration might roll out, particularly with his Republican party holding sway over Congress. Trump’s proposals, ranging from slashing corporate taxes and easing regulations to imposing tariffs and curbing illegal immigration, could boost corporate profits and energize the economy. However, they also pose certain risks, such as inflation and potential rate hikes by the Federal Reserve.
FedWatch and Treasury Yields
Traders now expect the Federal Reserve to lower rates by about 50 basis points this year, according to the CME Group’s FedWatch Tool. Meanwhile, the yield on the 10-year Treasury note remains anchored near the psychological level of 4.5%. Inflows into U.S. equity funds experienced a sharp decline in the week leading up to Jan. 1.
Economic Data and Corporate Performance
Later in the day, markets will parse ISM’s report on manufacturing activity for December, ahead of a key employment figure due next week. Comments from Richmond Fed President Thomas Barkin are also on tap. Despite stretched equity valuations, most brokerages expect another year of gains for U.S. stocks, propelled by strong corporate performance.
Premarket Trading
In premarket trade, alcoholic beverage makers such as Constellation Brands, Molson Coors, and Brown-Forman slipped more than 1%, after the U.S. surgeon general urged cancer warnings for alcoholic drinks. U.S. Steel slid 8% after President Joe Biden blocked Nippon Steel’s proposed $14.9 billion purchase of the company. Block rose 3.1% after brokerage Raymond James raised its rating to “outperform” from “market perform”. Trading volumes are expected to be subdued following the New Year’s holiday on Wednesday.
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