Before The Bell
The U.S. stock market resumes trading today, after pausing for a three-day holiday weekend. Overnight, the international markets put in a somewhat constructive session. In Asia, the Nikkei moved nicely higher, while in Europe, the FTSE 100 traded in a more mixed fashion. On our shores, the equity futures are pointing to a higher opening.
Investors are currently operating in a complicated environment. The economy remains quite mixed, due to ongoing pandemic-related issues. Many industries, such as travel, entertainment, and retail remain under considerable pressure; consumers are starting to lose confidence; and the employment situation is increasingly problematic. Nonetheless, Wall Street remains optimistic that recently developed vaccines can be rolled out on a meaningful scale, and that this effort will subdue the coronavirus, which continues to rage across the globe unchecked. To this end, the Biden Administration has announced a plan to inoculate 100 million Americans in 100 days. In addition, the Administration is hoping to pass a $1.9 trillion to a comprehensive relief package. Although encouraging, these efforts will have to be implemented smoothly, and will probably come at a cost, and some investors may be worried about inflationary pressures down the road.
In economic news, few reports will be released today. Tomorrow will also be a light day, as well. The lack of news may prompt investors to concentrate on the political change taking place in Washington, and to look more closely at the corporate sector. Of note, the fourth-quarter earnings season has just commenced. At the end of last week, we heard from a couple of large banks. Earlier today, Goldman Sachs (GS) and Bank of America (BAC) weighed in with their reports. Of note, the financial companies tend to be economically sensitive, and positive issuances from the leading names in this group would likely help assure investors that conditions remain stable. For the most part, most analysts on Wall Street expect that fourth-quarter corporate profits will decline from year-ago levels. However, they also will want to see signs of progress and encouraging guidance.
Technically, the stock market got off to a decent start in January, but has moderated over the past couple of sessions. It should be noted that equities are trading at elevated price-to-earnings multiples, in our view, and this leaves little room for disappointing news.
– Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
