Stock Futures Look to Inflation Data and Bank Earnings
U.S. stock futures started off the week with minor changes as traders eagerly awaited key economic data and earnings reports from major banks. Dow Jones Industrial Average futures dipped slightly by 0.1%, while the S&P 500 and Nasdaq 100 futures experienced marginal gains of 0.02% and 0.05% respectively. The week ahead holds crucial information regarding inflation data and earnings reports from prominent banks.
Tech Underperformance and Rising Treasury Yields Weigh on Markets
Last week, Wall Street experienced its first losing week in ten, mainly driven by underperforming mega-cap tech stocks like Apple, along with an increase in Treasury yields. The Dow Jones Industrial Average fell by 1.5%, while the S&P 500 slid 0.6%. The Nasdaq Composite, heavily influenced by tech stocks, suffered its worst weekly performance since September, tumbling 3.25%. Apple shares plummeted around 6%, and yields on the 10-year Treasury spiked above 4%.
Concerns Over Overbought Equities and Potential Correction Linger
Following the end-of-year rally, markets entered a consolidation phase, which raised concerns among investors who fear that equities have become overbought. Even with a dovish pivot from the Federal Reserve, uncertainty remains, especially after the December jobs report and meeting minutes indicating doubts about rate cuts. Chris Verrone, head of macro and technical research at Strategas, noted in a recent report, “I do think attitudes are probably getting a little too enthusiastic… That may need to get dealt with via some type of a consolidation or correction in the first quarter.”
Clarity Expected on Rate Cuts as CPI and PPI Data Released
The upcoming week will provide traders with greater insight into the Federal Reserve’s decision on rate cuts. On Thursday, the December consumer price index will be released, followed by the producer price index on Friday. These data points will indicate whether the central bank’s efforts to bring inflation down to its target of 2% are successful. As inflation remains a key factor in determining future rate cuts, the market will be paying close attention to these figures.
Earnings Season Begins with Big Banks and Other Major Companies
This week marks the beginning of the latest corporate earnings season, starting with the release of financial results from major banks. Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo are among the prominent institutions reporting their earnings. Additionally, Dow component UnitedHealth will also disclose its financial performance. The market will closely scrutinize these reports as they provide insights into the health and profitability of the financial sector. Other significant companies, such as BlackRock and Delta Air Lines, will also release their earnings data, further setting the tone for the overall market sentiments.
Analyst comment
Positive news: The upcoming week will provide clarity on rate cuts and offer insights into the health and profitability of the financial sector as major banks and companies release their earnings reports. This will help to determine the market sentiments.
Short analysis: The market is expected to react to key economic data and earnings reports from major banks and companies, influencing sentiment and potentially leading to market consolidation or correction in the first quarter. Investors will closely watch inflation data and rate cut decisions by the Federal Reserve.
