Futures contracts on the Dow Jones Industrial Average fell 60 points. S&P 500 futures fell 0.2% and the Nasdaq 100 fell 0.1%.
The stock market is coming off a good week to start 2021 as investors looked past a violent siege on Capitol Hill and focused on the prospect of further fiscal stimulus after a Democratic sweep of Congress. The S&P 500 has climbed for four consecutive days to a record high with a gain of 1.8% last week. The Dow Jones and the high-tech Nasdaq Composite rose 1.6% and 2.4% respectively the week before, also reaching all-time highs.
“The progress rests on three main pillars: strong corporate earnings, a massive recovery and vaccine optimism,” Vital Knowledge’s Adam Crisafulli said in a note Sunday. “Stimulus expectations are rising – Biden’s plan may be worth several trillions of dollars on paper, but what actually passes will likely be much smaller. ”
President-elect Joe Biden on Friday promised a major rollout of economic stimulus, which he said would amount to “trillions of dollars.” More details will follow in an official announcement Thursday, six days before he takes office.
The need for further stimulus was underlined by an unexpected job loss in December. The Labor Department reported on Friday that the non-farm payroll fell by 140,000 as new lockdown restrictions hammered virus-sensitive industries, marking the first monthly drop since April.
The political turmoil is expected to continue this week and it remains to be seen when and if the markets will be affected. Democrats, with the backing of some Republicans, are moving towards opening House impeachment proceedings against President Donald Trump as early as this week for inciting the mob attack. The House Rules Committee is expected to expedite the impeachment process without a committee hearing or vote.
For now, the market appears to be looking beyond that because Congress was able to confirm Biden’s election victory and the current Senate Democrats are likely to pursue another big stimulus. If these events start to delay or derail these stimulus packages, traders may start to pay more attention.
Some on Wall Street see a pullback on the horizon for the market, especially after a surprisingly strong 2020. The S&P 500 gained 16.3% last year.
“After being bullish for several months, we are definitely becoming more cautious about the stock market at these levels,” said Matt Maley, chief market strategist at Miller Tabak on Sunday. “We believe the vast majority of the rally from the March lows is behind us… and that a correction is likely to start at some point in the first quarter of this year. ”
Last week, the yield on benchmark 10-year treasury bills exceeded 1% for the first time since the March pandemic crisis.
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