Stock Futures Flat Ahead of Obama Speech; Coke Falls
NEW YORK (TheStreet) -- Stock futures were barely budging Tuesday as investors digested earnings from Coca-Cola(KO) and awaited President Barack Obama's State of the Union address Tuesday night.
Obama's speech is expected to partly focus on the need for budget reform, as the sequestered spending cuts totaling about $85 billion are scheduled to take effect in just two weeks. There's "little apparent opportunity for compromise before then," according to David Joy, chief market strategist at Ameriprise.
"Should the scheduled cuts take effect, we do not think they will represent a 'game changer' for the U.S. economy, but they will act as a drag and will raise the risk that growth in 2013 will disappoint," said Russ Koesterich, global chief investment strategist at BlackRock, in a note. "As we get closer to the March 1 sequester deadline, we do expect to see higher levels of financial market volatility as investor attention returns to the country's fiscal drama."
Futures for the Dow Jones Industrial Average were unchanged, or 2.76 points above fair value, at 13,924. Futures for the S&P 500 were also flat, or 0.26 points below fair value, at 1513. Futures for the Nasdaq were down 3.25 points, or 4.69 points below fair value, at 2767.
The Congressional Budget Office estimated that if the sequester does kick in as scheduled the budget deficit will shrink this year to $845 billion, or 5.3% of gross domestic product, its smallest size since 2008. At the same time, federal debt held by the public will reach 76% of GDP by the end of this fiscal year, the largest percentage since 1950.
Matthew Senicola, a registered representative at JHS Capital Advisors, said he's taking a cautious stance on the market at this point after six straight weeks of gains.
With only a handful of big companies posting earnings this week, he thinks the stage is being set for a bit of profit-taking.
He said given that cheap stocks are starting to become more and more difficult to find, "a small pullback would actually be healthy for the exchanges."