Market snapshot: Monday morning blues

After a strong run in 2021, buying has dried up as investors consider negatives. 

Some of the early new year momentum has stalled, with stimulus and economic concerns weighing on investor sentiment.

In the US, there were initial doubts on the President-Elect’s stimulus package passing through the necessary channels due to Republican opposition. At the same time, the oil price gave up some of its recent gains, as fears of weakening demand following the latest round of lockdowns was exacerbated by the possibility of even more stringent measures, given the spread of the new variant.

This in turn took the wind out of the sails of a recent revival in banking shares, which had been the subject of buying interest given some inflation expectations and also a more friendly economy.

In kicking off the fourth-quarter earnings season, bank shares were weaker, despite JPMorgan Chase (NYSE:JPM) reporting better than expected earnings, and also releasing some of the bad debt provisions it had previously made. The latter positive move was echoed at Citigroup (NYSE:C) and could become a theme for the remainder of the banks, although, less positively, it appears that loan demand could be sluggish in the short term.

Meanwhile, the effects of the pandemic on the consumer were again in evidence as a weak retail sales number was reported. The main indices remain in positive territory for the year, although gains have been capped – the Dow Jones is up 0.7%, the S&P 500 0.3% and the Nasdaq 0.9%.

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Such concerns have also dented sentiment in the UK, with airline and airline-related stocks and the oils under early market pressure. The read across from the States is also weighing on UK banks, although weaker sterling against a slightly recovering US dollar is minimising losses on the main index.

The FTSE 100 remains up by just over 4% in the year to date, but vaccine rollout optimism and hopes of economic recovery have switched to the back burner for the moment given these other considerations.