By Anna Hirtenstein
U.S. stock futures climbed amid a slew of earnings releases and
testimony by Janet Yellen in which she is expected to support
higher coronavirus relief spending.
Futures tied to the S&P 500 rose 0.7%, pointing to gains
after the opening bell. Those linked to the Nasdaq-100 also added
0.7%, suggesting a rally in tech stocks.
Earnings season kicked into high gear, with shares of Bank of
America falling 1.4% in premarket trading after it reported a
decline in quarterly profit of 22%. Goldman Sachs rose 2.2% after
releasing earnings that significantly beat expectations.
Netflix is expected to report results after markets close.
Major banks' earnings suggest they are "seeing the economy
stabilize; their worst-case scenarios haven't been met," said
Shaniel Ramjee, a multiasset fund manager at Pictet Asset
Management. "Even if the virus is still with us, banks are seeing
an uplift in the economy."
The strong markets of recent months have also boosted some
investment banks' trading revenues, which was reflected in Goldman
Sachs's earnings, Mr. Ramjee added.
Ms. Yellen is scheduled to speak before the Senate Finance
Committee at 10 a.m. ET, which will vote on her nomination for
Treasury secretary. According to a copy of her prepared remarks,
she will tell lawmakers that the U.S. risks a longer, more painful
recession unless Congress approves more aid, and to encourage them
to "act big" to shore up the recovery.
President-elect Joe Biden unveiled a plan for a $1.9 trillion
fiscal stimulus package last week, which would include direct
payments of $1,400 to most households and spending on vaccine
distribution. Passing it through Congress is one of the first major
tests for the incoming leader, who will be inaugurated
Ms. Yellen will be the "holder of the keys of unprecedented
spending," said Ludovic Subran, chief economist at Allianz. "It
will be reassuring for people to see she's very pragmatic in the
way that she addresses the crisis, similarly to how she was in her
role at the Fed."
Stock markets have begun the week on an optimistic note, as
accelerated Covid-19 vaccine rollouts begin to offset concerns
about the spread of the virus.
Portfolio managers are focusing on whether vaccines will be able
to cope with the mutations of the virus, and what that implies for
the possibility of future lockdowns, said Sebastien Galy, a macro
strategist at Nordea Asset Management.
In premarket trading, shares of major tech companies edged up.
Apple rose 1.5% and Facebook was up 1.9%. The Nasdaq Composite
Index ended last week down 1.5%.
"There's a buy the dip mentality," said Mr. Galy. "Cynicism
doesn't last long, it shows that equities can still rally
Shares of laser maker Coherent surged over 32% on the news that
Lumentum, a computer components firm, would buy it. Lumentum fell
close to 10%.
Overseas, the pan-continental Stoxx Europe 600 was nearly flat,
rising 0.1%. Jeep-owner Stellantis, the recently combined business
of Fiat Chrysler and PSA Group, gained 4.4%, extending Monday's pop
after it made its debut on French and Italian exchanges. The
company's shares on the New York Stock Exchange will start trading
Meanwhile, investors are watching for the results of a vote of
confidence in the Italian Senate, which will determine whether
Prime Minister Giuseppe Conte is able to continue governing or
The muted reaction in Italy's government bonds shows the massive
impact of European Central Bank stimulus and its ability to keep
markets stable, Mr. Subran said. The yield on the Italian 10-year
bond fell to 0.603% from 0.633% Monday.
"We tend to believe the coalition will reform, we still think
it's something that can be saved. But it's also revealed the
fragility of the coalition," said Mr. Subran.
In Asia, most major benchmarks rose. Hong Kong's Hang Seng Index
advanced 2.7% and Japan's Nikkei 225 index added 1.4%, led by
shares of tech and car companies. The Shanghai Composite Index
In U.S. bond markets, the yield on the benchmark 10-year
Treasury note rose to 1.112% from 1.097% Friday, with the market
closed Monday for Martin Luther King Jr. Day.
Write to Anna Hirtenstein at email@example.com
(END) Dow Jones Newswires
January 19, 2021 09:27 ET (14:27 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.