Market Analysis

Beyond the Numbers

Profit Taking May Lead To Initial Weakness On Wall Street
1/11/2021 8:50 AM

The major U.S. index futures are currently pointing to a lower opening on Monday, with stocks likely to give back ground following the strong upward move seen last week.

Profit taking may contribute to initial weakness on Wall Street after the major averages climbed to new record closing highs last Friday.

Traders may look to cash in on recent gains amid concerns the markets have risen too much considering the ongoing coronavirus pandemic.

Concerns about developments in Washington may also weigh on stocks as Democrats prepare another attempt to remove President Donald Trump from office.

House Democrats are preparing to once again impeach Trump even though the president has less than two weeks left in his term.

After the siege of the U.S. Capitol building by Trump supporters last week, Democrats are concerned about additional incitement by the president in his final days in office.

The markets have recently shrugged off the turmoil in Washington amid optimism about more stimulus under President-elect Joe Biden.

Biden pledged last Friday that we will pursue another stimulus package “in the trillions of dollars” due to the economic impact of the ongoing pandemic.

Stocks fluctuated over the course of the trading session on Friday but managed to end the day mostly higher. With the upward move on the day, the major averages all finished the session at new record closing highs.

The major averages all closed in positive territory, with the tech-heavy Nasdaq showing a notable advance. While the Nasdaq jumped 134.50 points or 1 percent to 13,201.98, the Dow rose 56.84 points or 0.2 percent to 31,097.97 and the S&P 500 climbed 20.89 points or 0.6 percent to 3,824.68.

For the first trading week of the New Year, the Nasdaq surged up by 2.4 percent, while the S&P 500 and the Dow jumped by 1.6 percent and 1.8 percent, respectively.

The markets benefited from optimism that a Democrat-controlled government will lead to more fiscal stimulus and a better handling of the coronavirus vaccine rollout.

In a statement on Thursday, President Donald Trump finally acknowledged "a new administration will be inaugurated on January 20th," although he declined to mention President-elect Joe Biden by name.

Trump has repeatedly refused to accept the outcome of the election, spouting fraudulent claims of widespread voter fraud that inspired his supporters to assault the U.S. Capitol building on Wednesday.

Traders seem hopeful for a return to normalcy, as Democrats will control both houses of congress and the White House but do not have the margin in the Senate to force through radical legislation.

Traders were also reacting to a closely watched Labor Department report showing an unexpected decrease in U.S. employment in the month of December.

The Labor Department said non-farm payroll employment fell by 140,000 jobs in December after climbing by an upwardly revised 336,000 jobs in November.

The decline surprised economists, who had expected employment to increase by about 71,000 jobs compared to the addition of 245,000 jobs originally reported for the previous month.

Employment decreased for the first time since April as the recent surge in coronavirus cases led to a nosedive in employment in the leisure and hospitality sector, which lost 498,000 jobs.

Traders have recently been looking on the bright side of almost every piece of news and may see the weak jobs data as more ammunition for Democrats to pursue additional stimulus.

Despite the advance by the broader markets, most of the major sectors finished the session showing relatively modest moves.

Gold stocks showed a substantial move to the downside on the day, however, with the NYSE Arca Gold Bugs Index plunging by 5 percent. The sell-off by gold stocks came amid a steep drop by the price of the precious metal.

Significant weakness was also visible among tobacco stocks, resulting in a 2.3 percent slump by the NYSE Arca Tobacco Index. The index ended the previous session at its best closing level in well over a year.

Housing and natural gas stocks also saw notable weakness on the day, while strength was visible among software and commercial real estate stocks.

Commodity, Currency Markets

Crude oil futures are falling $0.46 to $51.78 a barrel after jumping $1.41 to $52.54 a barrel last Friday. Meanwhile, after plummeting $78.20 to $1,835.40 an ounce in the previous session, gold futures are slipping $1.40 to $1,834 an ounce.

On the currency front, the U.S. dollar is trading at 104.28 yen versus the 103.94 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.2152 compared to last Friday’s $1.2218.


Asian stocks fell on Monday as U.S. President Donald Trump faces another impeachment this week over the Capitol riot and investors looked for signs of improvements in earnings.

Chinese shares ended sharply lower after data showed the country's factory prices fell at the slowest pace in ten months.

Consumer prices in China were up 0.2 percent year-on-year in December, the National Bureau of Statistics said. That exceeded expectations for an increase of 0.1 percent following the 0.5 percent contraction in November.

On a monthly basis, inflation was up 0.7 percent - again beating forecasts for an increase of 0.4 percent following the 0.6 percent decline in the previous month.

The bureau also said that producer prices were down an annual 0.4 percent, beating forecasts for a fall of 0.8 percent after sinking 1.5 percent a month earlier.

The benchmark Shanghai Composite Index tumbled 38.61 points, or 1.1 percent, to 3,531.50, while Hong Kong's Hang Seng Index ended marginally higher at 27,908.22.

Ten World Health Organization scientists will visit China beginning Thursday to probe the origins of Covid-19, authorities said today.

The Japanese market was closed for a holiday. Seoul stocks edged down slightly in choppy trading as caution crept in prior to expiration of stock options later this week. The benchmark Kospi slipped 3.73 points, or 0.1 percent, to 3,148.45.

Heavyweight Samsung Electronics rose 2.5 percent to a record 91,000 won amid reports that Intel is mulling outsourcing some of its chip production. Hyundai Motor soared 8.7 percent after reports that it plans to sign a partnership deal with Apple on autonomous electric cars by March.

Australian shares fell as gold miners succumbed to selling pressure for the fourth straight session. The benchmark S&P/ASX 200 Index dropped 60.70 points, or 0.9 percent, to 6,697.20, while the broader All Ordinaries Index ended down 64.70 points, or 0.9 percent, at 6,959.50.

Evolution Mining, Newcrest and Northern Star Resources lost 3-5 percent as gold extended losses to drop near a six-week low on a stronger dollar and higher U.S. Treasury yields on U.S. stimulus hopes.

On the positive side, Woodside Petroleum and Santos rose about 3 percent as oil prices held near a one-year high after Saudi Arabia's pledge last week to cut output. Shares of Whitehaven Coal jumped 2.9 percent.

In economic news, a government report showed the value of retail sales in Australia was up a seasonally adjusted 7.1 percent month-on-month November, coming in at A$31.654 billion. That beat expectations for an increase of 7.0 percent following the 1.4 percent gain in October.


European stocks have pulled back from over 10-month highs on Monday as worries over rising coronavirus cases overshadowed stimulus hopes.

The downside, however, remained limited after U.S. President-elect Joe Biden pledged a massive stimulus package for the economy.

Biden said that "trillions" in U.S. fiscal stimulus measures would be unveiled this week, which includes $2,000 direct payments to Americans and aid for small businesses.

The U.K.’s FTSE 100 Index, the French CAC 40 Index and the German DAX Index are all down by 0.9 percent.

Euronext shares are moving lower. The stock exchange operator said it had resolved a technical glitch in index derivatives trading.
Petroleum refining company Total has declined after announcing the acquisition of Fonroche Biogaz, a company that designs, builds and operates anaerobic digestion units in France.

TeamViewer AG has also moved to the downside. The software company said, according to preliminary figures, fourth quarter total billings grew 32 percent at constant currencies. The total subscriber base grew to 584 thousand at year-end from 464 thousand at prior year-end.

Medical technology company Smith+Nephew has tumbled. The company said that it expects to report a 7 percent decline in fourth-quarter underlying revenue.

Airline easyJet have also fallen after it signed a new five-year term loan facility of $1.87 billion underwritten by a syndicate of banks and supported by a partial guarantee from UK Export Finance under their Export Development Guarantee scheme.

On the other hand, Britain's biggest sportswear retailer JD Sports has surged higher after it forecast full-year profit to be "significantly ahead" of market expectations.

Relief Therapeutics Holding AG has also jumped. The Swiss company and NeuroRx, Inc. announced that they have signed a Clinical Trial Participation Agreement with Quantum Leap Healthcare Collaborative for the inclusion of ZYESAMI (RLF-100: aviptadil) in the I-SPY COVID-19 Clinical Trial.

Sanofi have edged higher. The pharmaceutical company has agreed to acquire Kymab for an upfront payment of approximately $1.1 billion and up to $350 million upon achievement of certain milestones

U.S. Economic Reports

Atlanta Federal Reserve President Raphael Bostic is scheduled to participate in a virtual conversation on the 2021 economic outlook via Webinar at 12 pm ET.

At 1 pm ET, the Treasury Department is due to announce the results of its auction of $58 billion worth of three-year notes.

Dallas Federal Reserve President Robert Kaplan is scheduled to participate in a virtual town hall hosted by the Dallas Fed at 6 pm ET.

Stocks In Focus

Shares of Twitter (TWTR) are moving sharply lower in pre-market trading after the social media giant permanently suspended President Donald Trump’s account due to the risk of further incitement of violence.

Athletic apparel maker Lululemon (LULU) is also seeing pre-market weakness despite forecasting fourth quarter earnings and revenue at the high end of its previous guidance.

On the other hand, Shares of Gilead Sciences (GILD) may move to the upside after the biopharmaceutical company raised its full-year earnings and sales outlook.
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