Wall St Poised for Higher Open as Markets Eye Data and Policy Changes

By Johann M Cherian and Pranav Kashyap

Wall Street is expected to open higher on Friday as investors await new economic data and possible policy changes from the incoming administration of President-elect Donald Trump.

As of 08:34 a.m. ET, the Dow E-minis showed an increase of 140 points, or 0.33%. The S&P 500 E-minis were up 21.75 points, or 0.37%, while the Nasdaq E-minis had risen by 101 points, or 0.48%.

Wall Street had a rough start to the year, with the S&P 500 and Nasdaq both closing lower for a fifth consecutive session on Thursday. This trend is contrary to the usual pattern where markets generally rise in the last five days of December and the first two days of January.

Currently, the S&P 500 and Dow are both on track for weekly declines exceeding 1%, while the Nasdaq has dropped around 2%. Technology stocks, which have previously led market gains over the last two years, suffered the most significant losses.

Analysts are expressing concern over the uncertainty regarding the policies that the Trump administration may implement, particularly as the Republican Party will control Congress. The new Congress will convene for its first session on Friday, with Trump scheduled to take office on January 20.

Trump's proposed measures, which include reducing corporate taxes, easing regulations, applying tariffs, and restricting illegal immigration, could potentially boost corporate profits and stimulate the economy. Yet, these proposals also come with certain risks.

Peter Andersen, founder of Andersen Capital Management, noted, "It’s a complicated picture. Initially, after the November elections, investors felt optimistic thinking the results were favorable for the market."

Andersen added that a significant focus is shifting towards whether Trump’s policies will bring about inflation, and if so, whether that would prompt the Federal Reserve to change its approach and start raising interest rates more aggressively.

Traders are currently anticipating that the Federal Reserve will lower interest rates by approximately 50 basis points this year, according to the CME Group's FedWatch Tool.

Meanwhile, the yield on the 10-year Treasury note has remained stable around the crucial 4.5% mark.

In the week leading up to January 1, there was a notable decline in inflows into U.S. equity funds.

Later today, investors will be paying close attention to the ISM report on manufacturing activity for December, along with an important employment figure set to be released next week.

Additionally, comments from Richmond Fed President Thomas Barkin are expected to provide further insight.

While stretched equity valuations are causing concern among investors, many brokerage firms remain positive, predicting another year of gains for U.S. stocks driven by strong corporate performance.

In premarket trading, stocks of alcoholic beverage producers such as Constellation Brands, Molson Coors, and Brown-Forman fell more than 1% after the U.S. surgeon general recommended cancer warnings on alcoholic drinks.

U.S. Steel shares dropped by 8% following President Joe Biden's blocking of Nippon Steel's proposed $14.9 billion acquisition of the company.

Conversely, Block saw a rise of 3.1% after brokerage Raymond James upgraded its rating to "outperform" from "market perform".

Trading volumes are anticipated to be lower in the aftermath of the New Year holiday on Wednesday.

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