Retail Sales, Bank Earnings, Muted Stimulus Response

Markets expect U.S. retail sales to have fallen in December under the impact of spreading lockdown measures. Lockdowns now seem to be flattening the U.S. Covid-19 infection curve.

At 8:30 AM ET, data due for release are likely to show a 0.2% drop, based on consensus forecasts.  This would represent a second straight monthly decline.

Industrial production and producer price inflation data for December will also be out later. Recent data indicate that industry and manufacturing have held up better than consumer spending. That was during the latest surge in the coronavirus.

Earnings Season

The week has seen a sharp improvement on banks’ profit outlook due to a sell-off in U.S. Treasury bonds. Updates from JPMorgan, Citigroup, Wells Fargo and PNC Financial (NYSE:PNC) start the earnings season. 

The difference between short-term rates and long-term rates is what determines a bank’s lending margins. Short-term rates are set to stay anchored close to zero for the next two years.

The sharp rebound in cyclical stocks will stamp the banks’ fourth quarter results. This followed vaccine authorizations at the end of 2020.  

Furthermore, investors will watch for updates on bad loan provisions, which fell sharply in Q3. This came after an initial surge in the previous three months.

Biden’s Stimulus Plans

President-elect Joe Biden’s stimulus plans received a muted response from global stock markets. It appeared to have discounted most of the $1.9 trillion in measures from his Thursday announcement.

The Euro Stoxx 50, Nikkei, and  the Shanghai Shenzhen CSI 300 all declined.  Both the Euro Stoxx 50 and Nikkei lost 0.6%.

Biden’s stimulus included a top up of $1,400 in direct payments to households and aid for state and local governments. It also included other elements that were all fiercely opposed by Republicans in the last session of Congress.

Chinese Tech Firms Removed from Blacklist

Biden’s announcement contained little to justify fresh buying.  Earlier in the week, the markets’ anticipation of the event had already driven all three indices to record highs.

Dow Jones futures lost 141 points, or 0.5% by 6:30 AM ET (1130 GMT). S&P 500 futures also lost 0.5% and NASDAQ Futures fell 0.4%.

The stock market will focus later on Alibaba (NYSE:BABA), Baidu (NASDAQ:BIDU) and Tencent Holdings (OTC:TCEHY).  Tencent’s ADRs were left off the latest update to the U.S. blacklist on investment in Chinese companies.

Meanwhile, Hong Kong-listed shares of mobile phone maker Xiaomi (OTC:XIACF) fell more than 10%. This was after they were surprisingly added to the list.