As we approach the start of today’s session, U.S. stock futures are indicating a decline at the opening bell. In overnight trading, stocks in Asia were mostly down. Meanwhile, the major European indexes are in negative territory. Elsewhere, oil prices are up slightly, with West Texas Intermediate ahead about 0.4%, at around $75 a barrel.
Stocks are off to a positive start this year, with a good part of the gains so far fueled by a solid rally last Friday. Investor confidence that inflationary pressure may be abating was driven by a slowdown in hourly earnings growth. Additionally, the latest Institute for Supply Management (ISM) report on the service sector showed that activity contracted in December, marking the first setback in the index since May of 2020. Both reports suggested that the Fed’s monetary tightening moves are gaining some traction, and that perhaps the central bank was one step closer to decreasing or halting its string of interest-rate increases.
Traders are hoping to get more confirmation on Thursday morning, when the Consumer Price Index (CPI) for December is released. There, current consensus is calling for a slight decline from November in the year-over-year reading. That will be the last CPI report ahead of the Federal Open Market Committee (FOMC) meeting which kicks off on the last day of January. Before that, the lead bank will also get to pore over the latest financial results from the major banks for a read on how consumers and businesses are holding up. Bank of America (BAC), JPMorgan Chase (JPM), Wells Fargo (WFC), and Citigroup (C) will all be reporting fourth-quarter earnings this Friday.
As it stands, none of these reports, on their own, is likely to sway the Federal Reserve either way, as the central bank has indicated it will need to see several months’ worth of evidence that inflation is receding. Indeed, two Fed officials, Raphael Bostic and Mary Daly, recently remarked that rates will have to move higher, and likely, according to Bostic, stay there for “a long time”.
Altogether, stocks started the week in mixed fashion. The Dow Jones Industrials fell 112 points, or 0.3%, while the S&P 500 slipped just under three points (0.1%). However, the tech-heavy NASDAQ bucked the trend, moving up 66 points, or 0.6%, as investors picked up some heavily beaten down names.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
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