Stock futures flat as investors weigh Fed’s next policy move

Traders on the floor of the NYSE, Oct. 12, 2022.

Source: NYSE

Stock futures rose slightly on Monday as investors weighed a potential slowdown, or pause, by the Federal Reserve and braced for a busy earnings week.

Futures contracts linked to the Dow Jones Industrial Average gained 75 points, or 0.22%. S&P 500 futures edged up 0.15%, while the Nasdaq 100 added 0.2%.

On Friday, the major averages rallied to end the week after briefly losing momentum from the January rally. The Nasdaq posted a slight gain for the week. However, the Dow and S&P each had losing weeks. All major averages remain in the green for the month. The Nasdaq leads the others with a gain of 6.44% since the beginning of the year.

Investors have been pricing in the possibility that the Fed is preparing to slow the pace of its inflation-fighting rate hikes after last week’s economic data showed declines in wholesale prices and retail sales.

On Friday, investors absorbed comments from Fed Governor Christopher Waller in favor of a quarter-percentage-point rate hike at the next meeting. A Wall Street Journal report on Sunday, meanwhile, raised the possibility of a spring break in rate hikes — a sign that the Fed may be nearing the end of its rate hike campaign.

“With investors growing more confident on the inflation side, it is clear that they are now looking beyond the current bullish cycle, towards an eventual pause and potentially even a narrowing of the line,” wrote the Deutsche Bank strategist Henry Allen in a note to clients on Monday. “But with investors now heeding the good news on inflation, the risk is that if inflation proves to be more persistent, we could be in for another bear market rally as we saw in the summer. last.”

According to data from CME Group, markets have priced a 99.7% chance of a 25 basis point hike, bringing the interest rate back to a target range of 4.5% to 4.75% .

No speeches from Fed officials are on the schedule before the January 1 central bank policy meeting. 31 and Feb. 1. Investors, however, will be watching another batch of economic data, including the Fed’s favorite inflation measure, the Personal Consumption Expenditures Price Index, due out Friday.

In the meantime, earnings reports could keep the market on edge, with around 40% of the Dow Jones expected to release its latest financial results and offer more insights into how companies are holding up to inflation and surges. interest rate. Some of the big names on deck include Microsoft, IBM, Tesla, Visa and Mastercard.

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