Stock futures were slightly lower Monday following the S&P 500’s worst week since March 2020, as investors awaited more corporate earnings results and a key policy decision from the Federal Reserve.
Futures on the Dow Jones Industrial Average fell about 80 points, or 0.3%. S&P 500 futures dipped 0.3% and Nasdaq 100 futures declined 0.5%. All three major indexes had been higher earlier in the session.
The early Monday action followed a brutal week on Wall Street in the face of mixed company earnings and worries about rising interest rates. The S&P 500 lost 5.7% last week and closed below its 200-day moving average, a key technical level, for the first time since June 2020. The blue-chip Dow fell 4.6% for its worst week since October 2020.
The sell-off in the tech-heavy Nasdaq Composite was even more severe with the benchmark dropping 7.6% last week, notching its fourth straight weekly loss. The index now sits more than 14% below its November record close, falling deeper into correction territory.
Investors are dumping riskier assets this year as they brace for the Fed to tighten monetary policy. Bitcoin dropped more than 8% over the weekend, wiping out nearly half of its value at its record high reached in November. The price fell another 5% Monday morning, falling most recently to $33,414.
The fourth-quarter earnings season has been a mixed bag. While more than 70% of S&P 500 companies that have reported results have topped Wall Street estimates, a couple of key firms let down investors last week, including Goldman Sachs and Netflix.
“What had initially been a stimulus withdrawal-driven decline morphed last week to include earnings jitters,” Adam Crisafulli, founder of Vital Knowledge, said in a note. “So investors are now worried not just about the multiple placed on earnings, but the EPS forecasts themselves.”
Peloton shares rose about 1% in premarket trading following a Wall Street Journal report Sunday that activist investor Blackwells is calling for the interactive fitness company to fire CEO John Foley and to seek a buyer.
IBM is set to report numbers after the bell Monday. Investors will also digest a slew of high-stakes Big Tech earnings, including Microsoft, Tesla and Apple.
Another crucial market driver will be the Fed’s policy meeting, which wraps up on Wednesday. Investors are anxious to find out any signals on how much the central bank will raise interest rates this year and when it will start.
Goldman Sachs said Sunday that its baseline forecast calls for four rate hikes this year, but the bank sees a risk for more rate increases due to the surge in inflation.
Meanwhile, bond yields have surged in the new year in anticipation of Fed rate hikes, which partly triggered the drastic sell-off in growth-oriented tech shares. While the 10-year Treasury yield finished last week lower around 1.76%, the benchmark rate has jumped about a quarter of a percentage point in 2022.
“The big story so far in 2022 has been the rapid move higher in interest rates, which is prompting investors to re-assess valuations for some of the most expensive segments of the market and rotate into value stocks,” said David Lefkowitz, head of equities Americas at UBS Global Wealth Management.
