By Joe Wallace 

U.S. stock futures declined Friday, signaling a muted end to a strong week on Wall Street as investors awaited data on how the economy performed at the start of 2021.

Futures tied to the S&P 500 fell 0.7%, indicating the benchmark gauge may open lower after megacap technology companies pushed it to its fourth record close of the new year Thursday. Futures for the technology-focused Nasdaq-100 index lost 0.6% and contracts tied to the Dow Jones Industrial Average declined 0.8%.

Markets appeared to be pausing after rallying for much of January, with money managers saying there was no clear catalyst for the decline. Investors have been cheered in recent days by a solid start to earnings season, though some are concerned that high valuations in corners of the market will leave stocks vulnerable in the coming months.

"With a lack of new ammunition, people are simply stopping off," said Lars Skovgaard Andersen, investment strategist at Danske Bank Wealth Management.

Investors are cautious of adding new positions ahead of the Federal Reserve's decision on monetary policy and earnings from major companies including Facebook, Apple and Tesla next week, he added.

Ahead of the opening bell in New York, shares of International Business Machines fell 7.9% after the company said it expected to return to revenue growth this year, following a 4.6% decline in 2020. Intel fell 4.9% after the chip maker posted net income for 2020 of $20.9 billion, down from $21.1 billion a year earlier.

Paint maker PPG Industries said sales volumes fell in the fourth quarter, pushing shares down 3.9% premarket. Kansas City Southern predicted double-digit revenue growth in 2021, lifting shares in the railroad company by 1.9%.

Of the 62 companies on the S&P 500 that had reported results by the end of Thursday, 89% have beaten analysts' expectations, according to FactSet.

"So far, so good," said Fredrik Öberg, chief investment officer for private banking at SEB, highlighting results from Netflix, BlackRock and several banks.

In the bond market, yields on 10-year U.S. Treasury notes slipped to 1.084% from 1.107% Thursday. Yields fall as prices rise. The WSJ Dollar Index added 0.3%.

Stocks broadly retreated in overseas markets and oil prices dropped amid worries that coronavirus restrictions were crimping demand for crude. Surveys of purchasing managers in Europe showed that high coronavirus rates and government curbs were increasing the risk of the second recession since the pandemic struck.

Parallel IHS Markit surveys due at 9:45 a.m. ET are expected to show that the U.S.'s manufacturing and services sectors continued to grow in January. Also Friday, data on existing-home sales are predicted to show a decline for a second-consecutive month in December.

The pan-European Stoxx Europe 600 index fell 1%, led lower by energy companies and travel-and-leisure firms, whose profits are closely tied to the fortunes of the economy. Brent-crude futures, the benchmark in international energy markets, slid 2.8% to $54.53 a barrel and West Texas Intermediate, the U.S. oil benchmark, fell 3.1% to $51.48 a barrel.

Political uncertainty pressured assets in Italy, where the benchmark FTSE MIB index dropped 1.9% after a local newspaper reported that Prime Minister Giuseppe Conte was considering a snap election. Mr. Conte is under pressure to strengthen parliamentary support for his government, a task that appears increasingly difficult, raising the prospect of fresh elections in the spring.

The probability of an election "has likely risen in the past few days, and markets are discounting it," said Francesco Pesole, foreign-exchange strategist at ING Groep.

Cautiously optimistic comments from European Central Bank President Christine Lagarde about Europe's recovery also weighed on Italian bonds, analysts said. Yields on 10-year Italian government bonds rose to 0.734% from 0.687% Thursday.

Among individual European stocks, Siemens rose 6.2% after the German engineering company said preliminary quarterly results were broadly ahead of market expectations. Volkswagen said deliveries rose in the fourth quarter, boosting shares in the German car maker by 4.6%.

In Asia, Hong Kong's Hang Seng Index ended 1.6% lower after a local newspaper reported that the city would place tens of thousands of people in lockdown to control Covid-19. China's Shanghai Composite fell 0.4%.

Mr. Andersen said he was closely watching outbreaks of coronavirus in China and Hong Kong, after many Asian economies rebounded quickly from the pandemic last year.

"It is of course a risk that this locomotive in Asia could be hurt by this, but we think they have it under control," he said.

Gold futures fell 1.4% to $1,840.50 a troy ounce in New York.

Write to Joe Wallace at Joe.Wallace@wsj.com

 

(END) Dow Jones Newswires

January 22, 2021 09:22 ET (14:22 GMT)

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