Stock futures mixed ahead of final January session, S&P heads for worst month since March 2020

Stock futures were mixed in overnight trading on Sunday as investors braced for the final trading day in what could be the worst month for the S&P 500 since March 2020.

Dow futures rose 37 points. S&P 500 futures dipped 0.18% and Nasdaq 100 futures fell 0.21%.

January has turned out to be a dismal month for stocks. The S&P 500 is headed for its worst month since the pandemic-spurred market turmoil in March 2020 as investors worry about inflation, supply chain issues and the upcoming rate hikes from the Federal Reserve.

The 500-stock average is nearing correction territory, down more than 8% from its intraday high earlier this month. The S&P 500 is down 7% in January.

The Dow Jones Industrial Average is also heading for its worst January since March 2020. The Dow is off by 4.4% this month.

The Nasdaq Composite, which is roughly 15% off its November record close, is headed for its worst month since October 2008 and the worst first month of the year of all time. The technology-focused average is down 12% in January.

Plus, the small-cap benchmark Russell 2000 is in a bear market.

Last week, the Federal Reserve indicated that it is likely to raise interest rates for the first time in more than three years in order to combat historically high inflation. Markets are now pricing in five quarter-percentage-point interest rate hikes in 2022.

The major averages experienced violent swings last week, with the Dow moving a gut-wrenching 1,000 points in both directions. The Dow ended the week 1.3% higher. The S&P 500 gained 0.8% last week and the Nasdaq was about flat for the week.

“This all kind of results in additional market volatility until investors digest this transition period,” said Michael Arone, chief investment strategist at State Street Global Advisors. “On the other side of this, the economy should continue to expand, earnings are pretty good. That’s enough to sustain markets, but I think they’re adjusting to the shift in monetary policy, fiscal policy and earnings.”

Earnings season continues this week with major reports from Alphabet, Starbucks, Meta Platforms, Amazon and more. About one-third of S&P 500 companies have reported fourth-quarter earnings and 77% have beaten Wall Street’s earnings expectations, according to FactSet.

“Mostly, this week will be all about whether the correction low is already in or whether last Monday’s intra-day low is again challenged and breached,” said Jim Paulsen, Leuthold Group chief investment strategist.  “The longer the S&P stays above last Monday’s low or moves even further away on the upside, the more that calm will return and fundamentals may again start to dominate emotions in driving the market.”

There are also key economic data this week, the most important of which is Friday’s January employment report.

—CNBC’s Patti Domm contributed to this report.