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Dow Futures Climb As Markets Await Yellen Senate Testimony, Bank Earnings; Dollar Slides

Low rates, trillions in fiscal support, improving earnings and accelerating vaccine rollouts have stocks on the move Tuesday ahead of Janet Yellen's first Senate appearance as Treasury Secretary later this morning.

The Monday Market Minute

  • Global stocks move higher as investors set expectations for the early days of President Elect Joe Biden's administration.
  • Treasury Secretary nominee Janet Yellen will urge lawmakers to 'go big' and support Biden's $1.9 trillion stimulus plan, supported by the pledge to keep rates at near-zero from Fed Chair Jerome Powell.
  • China pledges to continue fiscal support into 2021 after stronger-than-expected fourth quarter GDP from the world's second-largest economy. 
  • Improving earnings prospects, as well as accelerated vaccine rollout plans, are also adding to stock market optimism.
  • Oil prices extend gains as the dollar softens and China demand builds, with U.S. crude approaching $53 per barrel.
  • U.S. equity futures suggest a firmly higher open on Wall Street ahead of fourth quarter earnings from Bank of America and Goldman Sachs, as well as Yellen's Senate Banking Committee testimony at 10:00 am Eastern time.

U.S. equity futures powered higher Tuesday, while the U.S. dollar slumped lower and oil prices rallied, as investors headed towards the first days of President Elect Joe Biden's term in office in a bullish mood, buoyed by improving earnings, vaccine progress and deeper government stimulus.

With Biden set to be sworn in as the country's 46th President in just over 24 hours' time, investors have already set their expectations for the early portion of his administration, with comments from Federal Reserve Chairman Jerome Powell cementing a base of near-zero interest rates and ongoing bond market support, and prepared remarks from his Treasury Secretary nominee, Janet Yellen, urging lawmakers to 'go big' and support his $1.9 trillion stimulus package.

Yellen's remarks were released in advance of her appearance before today's Senate Banking Committee hearing, during which she is also likely to reiterate the administration's commitment to a market-determined rate for the U.S. dollar, offering a sharp contrast to the many interventions of outgoing President Donald Trump.

With the twin base of monetary support and fiscal stimulus in place, investors are also getting encouraging signals from Biden on vaccine rollout plans, which are expected to accelerate notably during his first weeks in office, a welcome sign given that U.S. deaths have passed 400,000 and total infections are approaching 25 million.

Further support for stocks came early Monday in the form of better-than-expected fourth quarter GDP data from China, where growth hit 6.5% and looks to accelerate further into 2021 on the heels of ongoing fiscal support from Beijing.

On Wall Street, fourth quarter earnings forecasts have improved following better-than-expected updates from JPMorgan  (JPM) - Get JP Morgan Chase & Co. Report and Citigroup  (C) - Get Citigroup Inc. Report last week, with collective S&P 500 profits now expected to fall 7.8% from last year before rebounding into a 16.7% gain over the first three months of this year.

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Around 43 companies will report this week, including Bank of America  (BAC) - Get Bank of America Corporation Report, Goldman Sachs  (GS) - Get Goldman Sachs Group Inc. (The) Report, Netflix  (NFLX) - Get Netflix Inc. Report, Procter & Gamble  (PG) - Get Procter & Gamble Company (The) Report, Morgan Stanley  (MS) - Get Morgan Stanley Report, United Airlines  (UAL) - Get United Airlines Holdings Inc. Report, UnitedHealthcare  (UNH) - Get UnitedHealth Group Incorporated (DE) Report and Honeywell  (HON) - Get Honeywell International Inc. Report.  

Futures contracts linked to the Dow Jones Industrial Average suggest a 225 point opening bell gain for the benchmark, while those tied to the S&P 500, which is up 0.32% for the month, are priced for a 30 point advance, Nasdaq Composite futures, meanwhile, are indicating a 115 point opening  bell gain.

In Europe, stronger-than-expected earnings added to the early week optimism, with the Stoxx 600 rising 0..17% in the opening hours of trading, with a solid 0.3% gain for the trade-sensitive DAX performance index.

In Asia, China's pledge to continue providing fiscal support for the world's second-largest economy, as well as the prospects of better trade relations between Washington and Beijing under President Elect Biden, failed to boost domestic stocks, which fell 1.5%, but did provide a boost to regional stocks, lifting the MSCI ex-Japan benchmark 1.5% into the final hours of trading. 

Away from equities, the U.S. dollar index slumped 0.3% to 90.482 against a basket of six global currencies ahead of Yellen's Senate testimony later this morning, while benchmark 10-year Treasury note yields edged higher, to 1.113%, in anticipation of the more accommodative fiscal stance of the President Elect. 

The weaker dollar helped oil prices extend their months-long rally into the second half of January, with support also coming from China's solid fourth quarter gains and the expectation of ongoing demand from the world's largest energy market.

WTI futures for February delivery were marked 46 cents higher from Friday's close and trading at $52.51 per barrel in early European dealing, while Brent contracts for March, the global benchmark, jumped 63 cents to $55.36 per barrel.