Dow falls more than 100 points as stocks sell off to end the week

Stocks fell on Friday after President-elect Joe Biden announced details of a $1.9 trillion stimulus plan and major banks released their quarterly results, kicking off the earnings reporting season.

The Dow Jones Industrial Average traded 130 points lower, or 0.4%. The S&P 500 dipped 0.5%, along with the Nasdaq Composite.

Dow Inc, JPMorgan Chase and Goldman Sachs led the 30-stock average lower. Energy, financials and materials were the worst-performing sectors in the S&P 500.

For the week, all three of the major averages were down more than 1%.

The market was expecting a sizable stimulus from Biden, with the S&P 500 up more than 8% in the last three months and rates on the rise.

Biden’s proposal, called the American Rescue Plan, includes increasing the additional federal unemployment payments to $400 per week and extending them through September, direct payments to many Americans of $1,400, and extending the federal moratoriums on evictions and foreclosures through September.

The plan also calls for $350 billion in aid to state and local governments, $70 billion for Covid testing and vaccination programs and raising the federal minimum wage to $15 per hour.

“There is real pain overwhelming the real economy — the one where people rely on paychecks, not investments, to pay for their bills and their meals and their children’s needs,” Biden said during a speech in Delaware Thursday night.

Tom Essaye, founder of The Sevens Report, said the proposal was “being met by a ‘sell the news’ reaction as markets already priced in most of what was included.”

“Plans for future historical stimulus, easy Fed policy and vaccines are now well known, and as such those catalysts simply don’t have the positive influence on stocks that they have over the past few months,” he added.

A third major relief bill has been widely expected in recent weeks, especially after the December labor market report saw the economy lose jobs and Democrats won two key Senate races in Georgia, giving Biden’s party narrow control of both houses of Congress.

Another spending bill, focused on climate change and infrastructure among other initiatives, is expected to be introduced in February, according to senior Biden officials.

It remains unclear whether Biden’s proposal will be welcomed in a sharply divided Congress. Though Democrats hold both houses, they will need to sway moderate members of their own party, such as West Virginia Sen. Joe Manchin, and some Republicans to increase spending. Democrats originally pushed for another multi-trillion package last year before agreeing to a $900 billion bill in December.

Nonetheless, CNBC’s Jim Cramer noted that famed investor David Tepper’s outlook on stocks is still positive.

“I don’t want to say he’s wildly bullish. I would say he’s very constructive,” Cramer said Friday on “Squawk on the Street.” “He saw this coming. He knew to get out and now he feels there are pockets where you should be in, pockets of very reasonable valuations.”

On Friday, investors got fresh looks at major banks such as JPMorgan Chase, Citigroup and Wells Fargo. JPMorgan reported better-than-expected earnings, but the stock fell more than 1%. Wells Fargo and Citigroup also declined 7.3% and 4.5%, respectively, even after posting earnings that beat analyst expectations.

Meanwhile, the U.S. Commerce Department said retail sales fell 0.7% in December. Economists polled by Dow Jones expected sales to remain flat.

Friday’s moves came after a quiet day on Wall Street, where the three major indexes finished with slight losses after tech stocks faded late in the session. Anticipation of the stimulus deal was reflected in other areas, however, as the more economy dependent Russell 2000 rose more than 2%.

—CNBC’s Thomas Franck contributed to this report.

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