Wall Street Set for Higher Open Amid Data and Policy Developments

By Johann M Cherian and Pranav Kashyap

Wall Street is expected to start the trading day higher as investors are closely monitoring upcoming economic data and anticipating potential policy changes from the incoming administration.

As of 08:34 a.m. ET, the futures for the Dow Jones Industrial Average rose by 140 points, or 0.33%, the S&P 500 futures increased by 21.75 points, or 0.37%, and the Nasdaq futures jumped by 101 points, or 0.48%.

Despite these positive signals, the start of the new year has been disappointing for Wall Street. On Thursday, both the S&P 500 and Nasdaq fell, marking their fifth consecutive day of losses. This downturn goes against the typical January trend where markets usually see gains in the last trading days of December and the first days of January.

Currently, the S&P 500 and the Dow are on track for weekly declines exceeding 1% each, while the Nasdaq has dropped about 2%. Tech stocks, which have been driving much of the market’s rally over the past two years, have faced significant sell-offs.

Market analysts have pointed to the uncertainty over the policies that President-elect Donald Trump may implement, especially with his Republican Party controlling Congress. The newly elected Congress is scheduled to begin its first session today, and Trump is set to be inaugurated on January 20.

Trump's policy proposals could range from cutting corporate taxes and reducing regulations to imposing tariffs and addressing immigration issues. While these initiatives could potentially boost corporate profits and stimulate the economy, they also present various risks.

According to Peter Andersen, the founder of Andersen Capital Management, “It’s a complicated picture. Initially, investors were excited about the election results thinking they were favorable for the market.” He added, “The key issue now is whether these decisions will lead to inflation, and if so, does that mean the Federal Reserve will need to raise interest rates more abruptly?”

Traders currently anticipate that the Federal Reserve may lower rates by around 50 basis points throughout this year, as indicated by the CME Group's FedWatch Tool. Additionally, the yield on the 10-year Treasury note remains close to the significant 4.5% threshold.

There has been a notable drop in inflows into U.S. equity funds in the week leading up to January 1.

Today’s market activity will also focus on the ISM manufacturing report for December, as well as a key employment figure set to be released next week. Comments from Richmond Fed President Thomas Barkin are anticipated later in the day.

Investors remain concerned about elevated equity valuations; however, most brokerages continue to forecast another year of gains for U.S. stocks, supported by robust corporate performance.

In premarket trading, shares of companies in the alcoholic beverage sector, such as Constellation Brands, Molson Coors, and Brown-Forman, fell more than 1% after the U.S. Surgeon General suggested that cancer warnings be placed on alcoholic drinks. Meanwhile, U.S. Steel saw its shares plummet by 8% after President Joe Biden denied Nippon Steel’s $14.9 billion acquisition of the company. Conversely, Block shares increased by 3.1% following an upgraded rating from Raymond James.

It is also expected that trading volumes will be lower today following the New Year's holiday.

(This story has been amended to clarify that the S&P 500 and Nasdaq closed lower for a fifth consecutive session on Thursday instead of the fourth.)

WallStreet, Market, Data