Stock futures traded mixed Monday morning as traders looked ahead to another packed week of corporate earnings results and economic data in the wake of the Federal Reserve’s latest monetary policy pivot.
Contracts on the S&P 500, Dow and Nasdaq declined in early trading. Treasury yields edged slightly higher on the long end of the curve, with the benchmark 10-year yield holding below 1.8%. U.S. crude oil prices built on recent gains after rising for a sixth straight week.
January marked a volatile month of trading for U.S. stocks, as investors in risk assets considered the implications of the Federal Reserve’s signals to unleash more aggressive policies to help bring down soaring inflation. Goldman Sachs economists said over the weekend they now expect the Fed will raise rates by a quarter-point five times this year, versus the four hikes the firm saw previously. The prediction echoes the path seen by other major banks including Bank of America, which now sees seven rate hikes, and JPMorgan, which expects five.
Whether the Fed is able to raise interest rates and otherwise adjust its policies to bring down inflation without negatively impacting economic growth and corporate profits remains a key question, however.
“No central bank wants to kill the economy in order to bring inflation down,” Kathy Jones, Charles Schwab chief fixed income strategist, told Yahoo Finance Live on Friday. Jones said she still expects three interest rate hikes this year, matching the Fed’s signaling from December. “Right now, I think there is a risk that they move too far too fast and overestimate the strength of the economy and the run in inflation that we’re seeing. I think that’s probably a greater risk than they move too slowly and allow inflation to get even further ahead of them.”
With prospects of higher interest rates and tighter financial conditions looming, stocks have traded choppily over the past month. This has especially been the case for technology companies valued heavily on expected future earnings, which would be pressured by higher rates. The Nasdaq Composite has shed 12% for the month-to-date through Friday’s close as the index continues to languish in a correction, or drop of at least 10% from a recent record high. The S&P 500 has so far dropped 7% in January, which would mark its worst month since March 2020. The Dow has declined by 4.4%.
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Fresh catalysts for the market and individual stocks are set to come this week with another packed slate of corporate earnings results due for release. Mega-cap technology companies including Alphabet (GOOG), Amazon (AMZN) and Meta Platforms (FB) are each set to report quarterly results, alongside other closely watched names including AMD (AMD), Snap (SNAP), Wynn Resorts (WYNN) and Merck (MRK). And these will also come during a busy week of new economic data, including the monthly jobs report from the Labor Department.
As of Friday, the expected earnings growth rate for the S&P 500 was at 24.3%, based on actual results from companies that had reported so far and projected results for those reporting later, according to FactSet. If this rate comes in as expected, it would mark the fourth consecutive quarter that S&P 500 earnings growth topped 20%.
Here’s where stocks were trading before the opening bell Monday morning:
S&P 500 futures (ES=F): -20 points (-0.45%), to 4,403.25
Dow futures (YM=F): -226.00 points (-0.65%), to 34,369.00
Nasdaq futures (NQ=F): -5.25 points (-0.04%) to 14,427.75
Crude (CL=F): +$0.50 (+0.58%) to $87.32 a barrel
Gold (GC=F): +$5.60 (+0.31%) to $1,792.20 per ounce
10-year Treasury (^TNX): +1.8 bps to yield 1.798%
NEW YORK, NEW YORK – JANUARY 26: People walk by the New York Stock Exchange (NYSE) in the Financial District on January 26, 2022 in New York City. The Dow Jones Industrial Average was up nearly 200 points in morning trading following days of volatility in global markets. (Photo by Spencer Platt/Getty Images)
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter