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 237 points, or about 0.7%. S&P 500 futures fell 1%, and Nasdaq 100 futures dropped by 1.4%.
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.
“While there have been several positive developments, we think the good news is now priced in, and reality is likely to return with month end and the Fed’s resolve to tame inflation,” wrote Mike Wilson, chief US equity strategist for Morgan Stanley, in a note Monday.