Despite blowout fourth-quarter earnings still pouring in, stocks are falling Friday as unclear timing on fiscal stimulus under the new administration begins to rattle sentiment amid a worsening pandemic outlook that’s also crippling markets around the world.
Shortly after the market open, the Dow Jones Industrial Average was falling 236 points, or 0.8%, while the S&P 500 slipped 0.7% and the tech-heavy Nasdaq fell 0.6%.
Heading up losses in both the Dow and S&P, shares of software giant IBM are plunging 8% after a post-market earnings report Thursday that fell short of analyst expectations.
Other earnings, however, were largely positive, with Siemens, Intel and Volkswagen all posting better-than-expected results after the closing bell, and Ally Financial and regional bank First Horizon also beating expectations Friday morning.
Energy firms are vastly underperforming the broader market, with Occidental Petroleum, TechnipFMC and Devon Energy falling 5%, 4.6% and 4%, respectively, as a worsening pandemic outlook continues to hit oil prices.
“The political reality of Washington is starting to impact markets, and it’s becoming more unclear when Democrats’ ambitious stimulus goals will become law,” Tom Essaye, the founder of Sevens Report Research, said in a note Friday.
Covid resurgence fears hit European cyclical stocks particularly hard, with the United Kingdom’s FTSE 100 falling 0.8% and France’s CAC 40 slipping 0.7%, while Hong Kong’s Hang Seng Index ended the day down 1.6% as several of its listed telecom giants urge the New York Stock Exchange to reconsider delisting their shares.
“It’s been a strange start to the year following a bumper two months, with vaccine optimism keeping sentiment upbeat despite the growing near-term Covid risks,” said Oanda Senior Market Analyst Craig Erlam on Friday. “The first quarter of the year, while being extremely promising on the vaccine rollout, is shaping up to be far harder than many maybe anticipated, exacerbated greatly by the new highly contagious variants.”
The pandemic continues to reach grim new highs around the world. Erlam points to U.K. retail sales released this morning that “highlighted the challenge facing the country,” with the longer lockdowns continue, “the more painful… and longer term the economic damage will become.” Purchasing data from manufacturers was also discouraging, even driving down the value of the pound by nearly 1% against the U.S. dollar.
The price of a barrel of West Texas Intermediate is down 2.5%, while international oil benchmark Brent Crude slips about 2.3%. Both are about 4% off their pandemic highs from earlier this month as an unexpected glut in supply begins to take shape.
What To Watch For
Massive fiscal stimulus has been helping the market reach new highs, particularly in the United States, where President Joe Biden is eyeing an additional $1.9 trillion relief package. It could be some time before any variant of that package becomes law, but Biden separately issued a slew of executive actions Friday morning that should, among other things, help distribute stimulus checks that have yet to be sent out and expand food-stamp benefits.
Biden’s Path To $1.9 Trillion Stimulus Still Unclear As GOP Resists Spending (Forbes)
Another 900,000 Americans Filed For Unemployment Last Week As Biden Preps Major Stimulus Push (Forbes)