Market snapshot: big test for the optimists this week

Within a raft of corporate results and other key events in the diary, could there be a positive catalyst?

Markets face the first acid test of the year as a raft of corporate earnings and further fiscal and monetary outlook comments look likely to test investor optimism.

In the US, the new President’s proposed stimulus package will be under the spotlight as bipartisan support is sought, while the Federal Reserve will provide its latest thinking on monetary policy during the week. The GDP release will add further colour to the state of the economy, while a host of companies reporting will be analysed for outlook comments as well as the numbers themselves.

After the well-received Netflix (NASDAQ:NFLX) results was offset by sharp share price declines for both Intel (NASDAQ:INTC) and International Business Machines (NYSE:IBM), the tech space will be of particular interest. The Nasdaq is already ahead by 5.1% in the year to date, and with expectations clearly high, the likes of Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT) and Facebook (NASDAQ:FB) will have their work cut out in maintaining the momentum.

Ahead of a major reporting week, which also includes updates from a range of other stocks, such as American Express (NYSE:AXP), Boeing (NYSE:BA), Tesla (NASDAQ:TSLA) and McDonald's (NYSE:MCD), the major indices have shaved some of their earlier gains, with the Dow Jones now up by 1.3% and the S&P 500 2.3% in the year to date.

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With the economy still on a tight leash, the UK is inching towards some kind of return to normality as the vaccine rollout continues apace. However, recent economic indicators and the lack of any breakthrough news has removed some of the shine from the FTSE 100’s bright start to the year. That said, the index remains ahead by just under 4% heading into the final week of January.

Meanwhile, a retail reset resulting largely from the pandemic is in further evidence, particularly for those companies with a heavy reliance on physical outlets. Unfortunately, the reported deals for the purchase of the Topshop stable by ASOS (LSE:ASC) and the Debenhams brand by Boohoo (LSE:BOO) are unlikely to be the last of such rescue packages in the nearer term.