Stock Futures Tick Lower After S&P 500 Closes At Record High

By Anna Hirtenstein

U.S. stock futures edged lower Friday, putting the S&P 500 on track to end the week with muted gains after notching its ninth record closing high for 2021.

Futures tied to the S&P 500 slipped 0.3%, pointing to a drop after the opening bell. Contracts linked to the Nasdaq-100 Index edged down 0.3%, suggesting that technology stocks may also slip.

Stocks have been choppy this week. Hopes about a fresh round of stimulus spending by President Biden's administration and the rollout of vaccines has led to a rally in markets for much of this year. The Federal Reserve this week also pledged to continue with loose monetary policy until the economy is on a stronger footing.

At the same time, concerns about the rich valuations of stocks, still elevated coronavirus infection levels, new variants of the virus, and hurdles faced by vaccination programs in many countries is giving pause to some investors.

"In the short term, it remains unclear when lockdowns will end, and whether consumers will rush out to spend on travel and entertainment when they are free to do so," said Willem Sels, chief investment officer of HSBC Private Banking and Wealth Management.

Mr. Sels remains optimistic about the prospects for growth. "Stock markets tend to look ahead and should be supported by the prospect of the global reopening," he said.

Mr. Biden said on Thursday evening that the U.S. has struck deals to buy another 200 million vaccine doses. Investors have also been closely watching progress made on the president's economic recovery plan, which White House officials have said will be rolled out in the coming weeks.

As the corporate earnings season slowly winds down, investors have been cheered by many companies' results beating analysts' expectations.

Markets are still being driven by "vaccine optimism, but for me the biggest factor for me has been the strong fourth-quarter earnings season. It is an additional factor of optimism," said Fahad Kamal, chief investment officer at Kleinwort Hambros. "Valuations, while stretched, are being supported by a more buoyant earnings picture."

Rating company Moody's and energy suppliers Enbridge and Dominion Energy are scheduled to report Friday ahead of the opening bell.

"There is more confidence about earnings growth as we go through earnings season, more guidance from companies which look very promising, " said Shaniel Ramjee, multiasset fund manager at Pictet Asset Management. " Even some of the most affected areas like travel and leisure have had a slightly more positive tone."

Investors are likely to be reallocating funds in their portfolios from fixed-income assets and cash into equities, Mr. Ramjee said. "There is optimism around the end to lockdowns and some cyclical recovery," he added.

In bond markets, the yield on the benchmark 10-year U.S. Treasury note ticked down to 1.155%, from 1.157% on Thursday.

The Michigan Consumer Sentiment Index's preliminary reading for February is scheduled to be released at 10 a.m. ET. That will provide some insight into consumer confidence, a key driver of the U.S. economy.

Oil prices retreated from recent highs after both OPEC and the International Energy Agency said Thursday that energy demand will continue to be subdued in the coming months. Both expect consumption of oil to pick up in the second half of the year. Brent crude, the international gauge for oil, declined almost 1% on Friday to $60.54 a barrel.

Overseas, the pan-continental Stoxx Europe 600 fell 0.2%.

In European equities, ING Groep climbed nearly 5% after the Dutch bank's profit declined less than expected in the fourth quarter. It also announced a dividend.

Italian bond yields ticked down for the eighth consecutive day, with the 10-year yield at an all-time low at 0.446%. Investors are betting that former European Central Bank President Mario Draghi, who is in the process of forming the next government in Italy, will introduce reforms long-sought by markets.

"They are clearly showing you optimism on Draghi: he's seen as a long-run solution to Italy's deep structural challenges," Mr. Kamal said. "It is very rare that you can attribute this tone to a single man."

Whether Mr. Draghi will actually be able to enact reforms remains to be seen, as Italy changes governments frequently, Mr. Kamal said.

The gap between Italian and German 10-year government bond yields reached multiyear lows on Friday, falling to 0.88 percentage point. This yield gap hasn't traded consistently below 0.9 percentage point since early 2010, before the euro crisis. Since then, it has only closed lower than Friday's level on two days in December 2015.

German yields have risen this week on the back of hopes for a vaccine-led recovery from Covid-19.

In Asia, Japan's Nikkei 225 slid 0.1% by the close of trading. Australia's SPX/ASX 200 Index declined 0.6% as a five-day lockdown was imposed in the state of Victoria. Some markets in the region including China, Hong Kong and South Korea were closed for the Lunar New Year and other holidays.

Bitcoin notched a record high overnight, trading above $48,680, according to data from CoinDesk.

Write to Anna Hirtenstein at [e-mail]

(END) Dow Jones Newswires

02-12-21 0516ET