By Yasin Ebrahim
Investing.com – The Dow closed lower after rising to intraday highs Thursday as losses in technology stocks offset gains in value stocks ahead expectations that President-elect Joe Biden will unveil a more than $1 trillion fiscal package to boost the economy.
The Dow Jones Industrial Average fell 0.36%, or 68 points, after hitting an intraday record of 31,223.78. The S&P 500 was down 0.31%, while the Nasdaq Composite slipped 0.12%.
Biden’s fiscal package, expected to be unveiled around 7:15pm EST, will likely include proposals to boost direct payments to Americans, state and local aid, and funding the distribution of vaccines.
Investor focus will likely center on the size of the package and any updates on potential tax hikes to partially offset a $1.5 trillion infrastructure and healthcare package expected to be unveiled in the latter half of 2021, Morgan Stanley (NYSE:MS) said.
“The market will be very attentive to the overall size of the proposed package as well as the extent of potential tax hikes. We believe a headline stimulus number substantially above $1.5 trillion would come as a surprise,” the bank said.
In another boost to stimulus optimism, Federal Reserve Chairman Jerome Powell reiterated the central bank would continue to keep the monetary spigot wide open as the risk of runaway inflation in the post-pandemic era is unlikely.
“The real question is, how large is that effect [post-pandemic rise in prices] is going to be and will it be persistent … clearly a one time increase in prices is very unlikely to meet persistently high inflation,” Powell said Thursday during a virtual event sponsored by Princeton’s Bendheim Center for Finance.
Powell’s remarks come just a day after vice chairman Richard Clarida said the fed won’t raise rates until inflation reaches 2%.
The latest weekly jobs report highlighted the need for further support as jobless claims surged 181,000 to a more than four-month high of 965,000, well above economists forecast of 795,000.
Value stocks – those linked with the performance of the economy – led the upside in the broader market, with energy, industrials and financials in the ascendency.
Financials will come under deeper the spotlight on Friday as a trio of Wall Street banks kick off the quarterly earnings season in earnest.
JPMorgan Chase (NYSE:JPM), Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC) report quarterly earnings on Friday. Banks have rallied in the run up to their quarterly reports as investors anticipate strength in trading divisions, improving trends in loans will drive up performance.
The potential restart of dividend payments as well as the size of share buybacks will also be closely watched.
Last month, the Fed lifted restrictions following a stress tests that found banks were sufficiently capitalized to withstand a negative economic shock.
Ahead of the slew of bank earnings, Delta Air Lines (NYSE:DAL) rose 2% as upbeat guidance offset mixed quarterly performance.
In tech, weakness in the Fab 5 offset strength in chip stocks.
Amazon.com (NASDAQ:AMZN), Facebook (NASDAQ:FB), Google-parent Alphabet (NASDAQ:GOOGL) and Microsoft (NASDAQ:MSFT) closed in negative.
Intel and Taiwan Semiconductor Manufacturing (NYSE:TSM) closed sharply higher, with the latter boosted by better-than-expected quarterly performance.
Intel (NASDAQ:INTC) rose 4%, as several analysts on Wall Street talked up the prospect of the beleaguered chipmaker as its set for new leadership.
In other news, Plug Power (NASDAQ:PLUG) fell 4% after JPMorgan initiated coverage on the stock at neutral, saying that the stock is “fully valued,” in the wake of its more than 100% gains since the start of the year.