Stock futures were trading lower on Monday morning amid a January rally as investors braced for a more hectic week ahead of earnings season and a possible interest rate hike from the Federal Reserve.
Futures for the Dow Jones industrial average fell 203 points, or about 0.6%. S&P 500 futures fell 0.9%, and Nasdaq 100 futures fell 1.2%.
Wall Street is having a successful week as the stock market’s January rally continues. 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% in 2023 after last year’s 19% loss and ended Friday at a new year-to-date high.
There are many 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, and tech giants Apple, Meta Platforms, Amazon and Alphabet later in the week.
The Federal Open Market Committee meets on Tuesday and Wednesday, when the central bank is expected to raise rates by a quarter of a percentage point. Investors will be looking for clues about how much higher the central bank will raise rates in the fight against inflation. Traders have boosted stocks this year as softer inflation reports suggest the central bank may soon pause its hiking campaign.
“Inflation has shocked the Fed to the upside; they should be careful not to inadvertently cut rates too early. Don’t buy into this frenzy about a couple of rate cuts priced in for December. For now, help in the unlikely event the Fed makes a crash landing,” said David Zervos, chief market strategist at Jefferies. said in a note to clients.