Stock futures traded lower on Monday morning amid a January rally as investors braced for the busiest week of earnings season and a possible interest rate hike from the Federal Reserve.
Futures tied to the Dow Jones Industrial Average slipped 203 points, or about 0.6%. S&P 500 futures fell 0.9%, and Nasdaq 100 futures dropped by 1.2%.
Wall Street is coming off a winning week as the stock market’s January rally continued. The Nasdaq Composite gained 4.3% for the week, while the S&P 500 and Dow added 2.5% and 1.8%, respectively. The S&P 500 is up 6% for 2023 following a 19% loss last year and closed at a new year-to-date high on Friday
There are several tests this week for this 2023 rally. About 20% of the S&P 500 will report earnings this week, including McDonald’s and General Motors on Tuesday followed by tech giants Apple, Meta Platforms, Amazon and Alphabet later in the week.
The Federal Open Market Committee meets on Tuesday and Wednesday, when the Fed is expected to hike rates by one-quarter of a percentage point. Investors will be looking for clues about how much higher the central bank will take rates in the fight against inflation. Traders have pushed stocks higher this year in part because of softer inflation reports, which they suspect could cause the Fed to soon pause its hiking campaign.
“Inflation has shocked the Fed to the upside; they need to be cautious not to inadvertently lower rates too early. Don’t buy into this gobbledygook about a couple of rate cuts being priced into December. For now, the Fed is only around to help in the very unlikely event of a crash landing,” David Zervos, chief market strategist at Jefferies, said in a note to clients.