Wall Street Heads for Steady Start Amid White House Drama
Wall Street was headed for a steady start on Tuesday as a sell-off in U.S. Treasuries lifted demand for the dollar and markets hoped for a calmer countdown to Joe Biden’s inauguration next week.
Lacklustre trading in European shares along with no major corporate news or economic data offered few indications of market direction.
Markets are sending mixed start-of-year messages as stocks largely hold their highs, gold and the dollar stabilized and Treasuries fell, said Ned Rumpeltin, European head of currency strategy at TD Securities.
“It’s still a relatively tense week for U.S. politics and in the next few days, things could happen. That will keep investors perhaps on the defensive a bit,” Rumpeltin said.
Democrats said they will give President Donald Trump one last chance on Tuesday to leave office days before his term expires or face an unprecedented second impeachment over his supporters’ deadly Jan. 6 assault on the U.S. Capitol.
Dow E-minis were up 0.2%, with S&P 500 E-minis gained 0.26%. Nasdaq 100 E-minis were up 0.3%. A sell-off in U.S. bonds was fuelled by the prospect of more government stimulus under President-elect Biden, who takes over the White House next week, analysts said.
Yields were also pushed up by markets bringing forward bets on Federal Reserve interest rate hikes to 2023, and a withdrawal or tapering of asset purchases before then.
It puts the spotlight on Federal Reserve Chairman Jerome Powell, who speaks at an event hosted by Princeton University at 1730 GMT on Thursday.
The yield on benchmark U.S. government 10-year debt, which rises when prices fall, was up 0.039 basis points to 1.1735%.
The U.S. dollar, which hit a more than a two-and-a-half-year low earlier this month, held recent gains, helped by the spike in U.S. Treasury yields.
Investors were looking to the new earnings season on Wall Street, with banks JPMorgan, Citi, and Wells Fargo reporting on Friday.
“The big takeaway from those will be, how much more will they set aside in terms of loan-loss provision, as they were quite heavy in 2020, and how many of the U.S. banks restart buybacks and dividends,” said Michael Hewson, chief market analyst at CMC Markets on Wall Street. “I suspect it won’t be as many as people think.”
Analysts said it was unclear how much worse the pandemic get in Britain and Europe generally, and whether a second wave was unfolding in China.
Bank of England Governor Andrew Bailey said Britain faced a difficult few months ahead due to a resurgence in COVID-19 cases.
Shares in London fell 0.7%, but Paris and Frankfurt were little changed.
Consolidation was also a theme in Asia overnight as well, where MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.5% after touching a record high on Monday, led by a 2.6% drop in South Korea as investors took some profits from a soaring Kospi. [.KS]
Strong inflows helped Chinese blue chips rise 1.11%. [.SS]
Brent crude was up 1.5% at $56.49 a barrel. U.S. crude traded at $53.03, up 1.4%. [O/R]
Gold, which has been sold as U.S. yields rise because it pays no interest, steadied at $1,860 an ounce, up 0.9% [GOL/]
Bitcoin stabilized at around $35,500 after Monday’s huge drop. It hit a record high of $42,000 on Jan. 8.
(Reporting by Huw Jones in London; additional reporting by Paulina Duran in Sydney; editing by Pravin Char, Larry King)