Futures for the three major indices, the Dow Jones, S&P and Nasdaq are all indicating a flat opening to the market this morning. With the day heavily-focused on Donald Trump’s first official press conference since becoming President-elect, due at 11:00 ET, or 16:00 GMT, markets will be unlikely to take any particular direction prior to that. Trump is expected to focus on how his administration plans to approach policy with regards to international trade, taxation and infrastructure spending. The direction of markets between now and the end of the week and beyond can be expected to be strongly influenced by the sentiment the press conference provokes.
Yesterday followed a similar pattern to Monday on Wall Street with the Nasdaq managing to record a modest gain of 0.36%, while the Dow Jones recorded a 0.2% dip and S&P finished flat. Of the three indices, the Nasdaq has had the strongest start to the year, up 3.1% since the beginning of January. The S&P and Dow Jones also started well but have since faded and are up 1.3% and 0.5% respectively. This year’s performance by the Nasdaq is in contrast to 2016 when it trailed its peers.
The Nasdaq’s health-related stocks have been providing a boost for the index, the Biotechnology sub-index is up 8.1% for the year, as have the giant tech stocks. One theory is that this is a somewhat artificial boost for the Nasdaq, with money managers throwing money at big, liquid tech stocks like Facebook, Alphabet and Telstra in the hope they outperform the benchmark indices as a short-term early-year fix.
Market commentator James Depporre raised the concern in an article for The Street that such narrowing of the market can often precede a correction. However, given the recent market reactions to Trump, the announcement of big infrastructure spending plans and the avoidance of signaling an extreme protectionist stance on global trade will likely mean a further boost for equities markets, at least over the short term.
However, with earnings season starting corporate results will be another driver of the main indices over the coming weeks. Financials, which had a good day on the S&P yesterday, the sector up 0.4%, will kick things off with Bank of America, JPMorgan, and Wells Fargo all scheduled to release quarterly results on Friday. Their investors will be hoping that the Friday 13th date does not prove to be a bad omen!
Industrials also did well on the S&P yesterday, led by airline stocks, up 0.3%. However, industrials fared less well on the Dow Jones as the slumping oil price hit heavy hitters such as Exxon, which lost 1.3% and Chevron, down 0.8%.
Dividend companies have been among the worst performers since Trump’s election as capital flows towards risk-on sectors and that trend continued yesterday with the utilities and real estate sectors on the DJIA losing 0.3% and 1.3% respectively.