By Barbara Kollmeyer, MarketWatch , Ryan Vlastelica
J.P. Morgan, Wells Fargo results hit by fourth-quarter tax legislation
U.S. stock-index futures pointed to a mostly higher open on Friday following the first readings of the fourth-quarter reports, which came in below forecasts, although this factor was seen as largely related to the recently passed tax bill in Washington.
A sharp decline at Facebook also weighed on the technology sector, and Nasdaq Composite Index.
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What are stock futures doing?
Futures for the Dow Jones Industrial Average rose 108 points, or 0.4%, to 25,664, while those for the S&P 500 index were 0.1% higher, or 3.25 points, at 2,772.75. Futures for the Nasdaq-100 index were down 16 points, or 0.2%, at 6,710. All three were off their highs of the premarket session.
Major stock indexes hit record levels on Thursday , as investors shrugged off weaker economic data and energy names stormed ahead. The S&P 500 index climbed 0.7% to 2,767.56, while the Nasdaq and the Dow industrials each advanced 0.8%, to 7,211.78 and 25,574.73, respectively.
The Russell 2000 index of small stocks also hit a record, rallying 1.7% to 1,586.
For the week through Thursday, the Dow and Nasdaq are each up over 1% and the S&P 500 has gained 0.9%. This is the second straight weekly gain for both the Dow and the S&P, as well as their seventh positive week of the past eight.
The U.S. stock market will be closed on Monday for Martin Luther King Day
What is driving the markets?
The fourth-quarter earnings season unofficially kicked off on Friday, with results from a number of major financial institutions, a sector analysts expect to put in a mixed performance . Earnings growth is expected to be strong this quarter, although the recently passed tax law out of Washington is expected to "muddy" some results , according to Goldman Sachs.
J.P. Morgan Chase & Co.(>> JP Morgan Chase & Company) reported a 37% drop in earnings , although this was largely related to one-time charges associated from the new tax law, which is expected to provide further gains over the longer term. Wells Fargo & Co. (>> Wells Fargo) reported earnings and revenue that came in below consensus analyst forecasts in the fourth quarter. Shares of J.P. Morgan edged higher in premarket trading while Wells fell 0.9%.
BlackRock Inc. (>> BlackRock) reported earnings that came in above expectations , helped by the massive inflows into the company's iShares line of exchange-traded funds. Shares rose 1.1% before the bell.
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Separately, investors were following reports that German Chancellor Angela Merkel's conservative CDU party and Martin Schulz's center-left SPD had reached an agreement on a blueprint for formal coalition negotiations . This was seen as a sign of political stability in the eurozone's biggest economy, and it supported the euro, which in turn led to a decline in the U.S. dollar. A weaker greenback is seen as providing a tailwind for the profits of multinational companies.
U.S. retail sales rose 0.4% in December, the fourth straight monthly gain, although it was slightly below the 0.5% increase that analysts had forecast. The consumer-price index rose 0.1% in December.
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What are strategists saying?
"The overarching sentiment around the tax bill is that we'll continue to see a boost to earnings and optimism, but its hard to imagine that we're not getting close to a point where we're priced for perfection," said Jason Browne, chief investment officer of FundX Investment Group. "There's a question of whether we'll have good earnings, and a possibility that the reality won't live up to what had been anticipated."
Stocks have been in an essentially uninterrupted uptrend for years, and the S&P 500 is poised to go a historic length of time without a dip of even 5%. Volatility has also been historically low.
"The move isn't about fundamentals anymore, but the overall euphoria," Brown said. "When we do get negative moves we don't hold them; the environment pushes people to buy dips. Will that last forever? Of course not. You have to hope people are being realistic."
Which stocks are in focus?
Shares of Facebook Inc.(>> Facebook)fell 5.4% in premarket . In a blog post late Thursday, Chief Executive Mark Zuckerberg said the social-media website will prioritize personal posts from family and friends over business and news media posts. He acknowledged the move could come at the expense of the company's bottom line.
The social-media giant is one of the largest stocks in the market, and as such, moves in it have an outsize impact on major indexes, particularly the tech-heavy Nasdaq.
GameStop Corp.(>> GameStop Corp.) sank 3.8% in premarket trading after it reported a big jump in holiday sales, but said it would take impairment charges of $350 million to $400 million related to its technology brands business.
Shares of eBay Inc. rose 1.7% after an upgrade from analysts at SunTrust RH. Separately, Snap Inc.(>> Snap Inc) fell 1.8% before the bell after it was downgraded to underperform at Raymond James.
What are other markets doing?
In Europe, equity gains were checked by a strong euro, with the Stoxx 600 index up 0.1%.
Stocks in Asia closed mostly higher , but Japan's Nikkei 225 index fell 0.2%.
Gold rose 0.8% to $1,332.40 an ounce , as the dollar fell. The ICE dollar index tumbled 0.5% to 91.381, with losses concentrated against the euro , which hit a three-year high against the dollar.
Oil prices stepped back from three-year highs as investors waited for formal word on whether President Trump will extend temporary waivers on U.S. sanctions against Iran, which has implications for that country's oil exports. The West Texas Intermediate February contract was last down 0.6%.
In cryptocurrencies, the bitcoin spot price rose 5% to $13,963.44. Bitcoin futures on the CME Group Inc. rose 3.8% to $13,905.