By Paul Vigna and Caitlin Ostroff
U.S. stocks fell on Friday after President-elect Joe Biden
unveiled a $1.9 trillion Covid-19 relief plan and the December
retail-sales report came in weaker than expected, underscoring the
coronavirus pandemic's continued effect on the economy.
The Dow Jones Industrial Average lost 177.26 points, or 0.6%,
closing at 30814.26. The S&P 500 fell 27.29 points, or 0.7%, to
3768.25 and the Nasdaq Composite dropped 114.14 points, or 0.9%, to
12998.50.
Friday's decline cemented a down week for equities, with the Dow
down 0.9%, and the S&P and Nasdaq both falling 1.5%. The
small-cap Russell 2000 bucked the trend, rising 1.5%.
For several months, the markets have been riding a number of
strong trends that have powered everything from large-cap stocks to
bitcoin to record highs. Underlying all of it has been a bet on
government and central-bank aid to offset the damage wrought by the
pandemic.
Keeping up that momentum, though, is difficult.
"However you look at it, we're extended here," said Frank
Cappelleri, the executive director of brokerage Instinet.
Investors aren't likely to become more risk averse unless this
week's trends accelerate, he said, if bond yields, for instance,
continue to fall or the dollar weakness reverses substantially.
"That could change a lot of what we've seen across asset classes,"
Mr. Cappelleri said.
The market wasn't really thrown off by Mr. Biden's stimulus
plan, said Esty Dwek, the head of global market strategy at Natixis
Investment Managers. It expected a large number, and expects, too,
that Congress will likely produce a smaller package.
"It's almost a buy-the-rumor, sell-the-fact trade," she
said.
While the aid package is designed to boost the economy, it could
come with some direct ramifications for stock holders, said Wei Li,
head of investment strategy for BlackRock's exchange-traded fund
and index investments for Europe, Middle East and Africa. "With the
Senate majority, [taxes] could be coming in the medium term and
that is something the market has to assess as well."
Friday's retail-sales report underscored the need for some kind
of economic aid. U.S. consumers cut back on spending in December,
the peak of the holiday season, as the country confronted a surge
in coronavirus infections.
Investors are hoping that additional spending will help steer
the U.S. economy through a winter that has seen high Covid-19
infection rates and worsening economic data. Figures released
Thursday showed that the number of workers filing for jobless
benefits posted its biggest weekly gain since the pandemic hit last
March.
"When you see data this bad, you have to question if the
prevailing expectation -- for cyclical recovery to come through --
if that would be shaken," Ms. Li said.
Consumer confidence has been shaken a bit. The University of
Michigan's preliminary January consumer sentiment survey slipped to
79.2 from 80.7 in December. While the numbers are up from April's
low of 71.8, they are down more than 20% from the year ago level of
99.8. Consumer spending accounts for more than two-thirds of U.S.
economic activity.
In corporate news, JPMorgan Chase fell 1.8% to $138.64 after the
bank reported its highest-ever quarterly profit, though its
full-year earnings fell 20%. Shares of Wells Fargo fell 7.8% to
$32.04 after its revenue fell more than forecast, with lower
interest rates weighing on net interest income. Citigroup slid 6.9%
to $64.23 as it reported fourth-quarter results.
Shares in Exxon Mobil dropped 4.8% to $47.89 after The Wall
Street Journal reported that the Securities and Exchange Commission
launched an investigation into the energy giant after an employee
filed a whistleblower complaint last fall alleging that it
overvalued one of its most important oil and gas properties.
In bond markets, the yield on the 10-year Treasury note ticked
lower to 1.097% from 1.128% Thursday. Yields fall when bond prices
rise.
Despite days that see a pullback in markets, investors still
expect that the additional fiscal stimulus will support a rally in
stocks this year.
"Ultimately, you can't expect equities to go up every day in a
straight line," said Mike Bell, global market strategist at J.P.
Morgan Asset Management. "The numbers are really quite incredible
and I think it is going to all add up to a boom in growth once the
vaccines are rolled out."
Overseas, the pan-continental Stoxx Europe 600 fell 1% to
407.85.
Trading in Asia ended on a mixed note. China's Shanghai
Composite rose less than one point to 3566.38, while Hong Kong's
Hang Seng gained 0.3% to 28573.86 and South Korea's Kospi slid 2%
to 3085.90.
In Hong Kong, shares in Xiaomi, a consumer electronics company
that focuses on mobile phones and household appliances, closed 10%
lower after the U.S. Department of Defense added Xiaomi to a list
of companies it says support China's military.
Write to Paul Vigna at paul.vigna@wsj.com and Caitlin Ostroff at
caitlin.ostroff@wsj.com
(END) Dow Jones Newswires
January 15, 2021 16:51 ET (21:51 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.