Stocks Cool After Record Highs As Wall Street Preps For Tesla’s S&P Addition And Waits For Stimulus

Topline

Stocks are on track to close the week at or near record highs despite a lukewarm start to the market on Friday, as investors await a conclusion to stimulus negotiations in Washington on what’s set to be a record day for trading.

Key Facts

Shortly after the open, the Dow, which closed at a high Thursday, was virtually flat, while the S&P 500 ticked up 0.1%, and the tech-heavy Nasdaq edged up 0.2%.

On the earnings front, shares of Olive Garden parent Darden Restaurants fell 2% after the firm reported Friday morning that sales have plunged nearly 20% due to increased restrictions on indoor dining, a sign Covid-19 is “once more weighing on discretionary spending,” notes Vital Knowledge Media Founder Adam Crisafulli. 

Also heading up losses in the S&P, FedEx beat earnings expectations thanks to still-strong package volume, but higher costs dented the courier’s profit margins, pushing shares down 3%; shares of insurer Centene also fell about 3% following downbeat guidance for the firm’s profit next year.

Following a more than 30% rally since November, oil prices are finally cooling down Friday, with the price of U.S. benchmark West Texas Intermediate climbing just 30 cents to about $48.70 per barrel. 

Yields on the ten-year Treasury Bond—a bellwether of investor confidence in the equities market—fell to about 0.92% on Friday morning following a week of gains as stimulus negotiations inched forward.

Global markets were also tepid Friday, with the United Kingdom’s FTSE 100 climbing 0.1% and France’s CAC 40 virtually flat, while Asian stocks generally ended the day slightly lower.

Crucial Quote 

The market’s off to a “relatively flat start” as stimulus negotiations—a large market driver in recent weeks—head into a critical weekend, notes Oanda senior market analyst Craig Erlam. “Both sides appear very close to agreement after months of wrangling. It may just turn out to be a bridge to another package in the new year but that’s better than the alternative and sees the country through to the new administration, providing critical support in the interim.” Senate Majority Leader Mitch McConnell (R-Ky.) reportedly warned lawmakers that a weekend vote may be necessary. 

What To Watch For

The market could be in for some volatility Friday as S&P index investors sell nearly $100 billion in stock to make room for the index’s addition of Tesla after the close. It’ll be the largest addition to the S&P ever, entering the index as a top 10 holding.

Tangent

German automaker Volkswagen on Friday said a “massive semiconductor supply bottleneck” has forced it to cut its first-quarter production as chipmakers reroute inventory to other sectors booming during the pandemic, such as consumer electronics. Shares are down 2%.

Further Reading

Walmart, Disney, Hilton And 8 More Stocks Bank Of America’s Experts Are Buying For 2021 (Forbes)

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