Futures crawled after stocks close volatile session in the red

Contracts on Wall Street’s key benchmarks crawled in post-market trading Monday after US stocks closed lower to end a choppy session wrought by mixed corporate earnings and renewed Federal Reserve worries ahead of a fresh inflation report due out this week.

Futures on all three main indexes were flat ahead of overnight trading after equities extended a streak of volatility that has become the norm this year so far. In Monday’s main session, the S&P 500 faltered after its best weekly rise of the year last week, while the Dow was little changed and the Nasdaq continued its sell-off as pressures in technology stocks persisted.

Mixed fourth quarter results from US tech giants have weighed on investors already grappling with a Fed readying to tighten monetary conditions and raise interest rates as soon as next month. Stocks slide last week following a disappointing outlook from Meta Platforms (FB) and posted a sharp comeback following an earnings beat by Amazon’s (AMZN). Another trove of results lies in store for investors this week from companies including Disney (DIS), Uber (UBER), Lyft (LYFT), Pfizer (PFE) and Coca-Cola (KO). Peloton (PTON) will also unveil its 2021 year-end figures amid reports that companies including Amazon and Nike (NKE) are weighing potential acquisition bids.

“The first few weeks of this year were driven much more by macro concerns — higher interest rates, pricing the Fed, inflation,” Stuart Kaiser, UBS head of equity derivatives research, told Yahoo Finance Live. “Since then, we’ve had a window of opportunity where earnings took over.”

Despite a steep sell-off in Meta, other tech companies reported strong earnings that allowed the market to recover, Kaiser added.

“Now that that’s over – about 70% of S&P companies and 80% of tech companies reported earnings – we do think the focus shifts back to the macro side of the ledger this week,” he said, adding that the European Central Bank and Bank of England are tightening monetary policy along with the Fed and a series of high inflation prints are expected in coming months. “When we put that all together, we don’t think the bumpy ride is over.”

The Consumer Price Index (CPI) will be closely watched on Thursday and is likely to show another multi-decade high print on inflation, a reading that could prompt the Fed to assert the more hawkish stance it has taken on. Economists expect a headline CPI print of 7.3% in January over last year, which would mark the fastest rise since 1982, according to consensus estimates compiled by Bloomberg.

Bank of America said in a note out Monday that more downside in equities is likely — at least according to history.

The S&P 500 year-to-date-correction from early to late January was 9.8% on a daily closing price basis. During the midterm year of a US presidential cycle, corrections on the S&P 500 averaged 20%, BofA technical research strategist Stephen Suttmeier pointed out. In 17 of 21 midterm years, the S&P 500 had corrections greater than 9.8%, 15 years saw corrections of 15% or more, and nine out of 10 experienced corrections of at least 20%.

The index struggles just after a first Fed rate hike but tends to do better for the 5-, 6- and 12-month periods after initial increase, according to Suttmeier. Furthermore, the best part of the presidential cycle follows from the midterm year low through the third year of the term. Bank of America indicated that rallies off the low into year-end can be strong and have an average return of 17.6%.

“US equities tends to struggle just after the first rate hike of a Fed tightening cycle, which could come as early as the March FOMC meeting, but the data suggest buying a dip,” Suttmeier wrote.

6:01 pm ET: Monday: Futures tick higher after closing in the red to start the week

Here were the main moves in markets ahead of overnight trading Monday:

  • S&P 500 futures (ES=F): +7.24 points (+0.16%), to 4,483.00

  • Dow futures (YM=F): +34.00 points (+0.10%), to 35,003.00

  • Nasdaq futures (NQ=F): +35.00 points (+0.24%) to 14,594.75

  • Raw (CL=F): +$0.18 (+0.2-%) to $91.50 a barrel

  • Gold (GC=F): -$0.10 (-0.01%) to $1,821.70 per ounce

  • 10-year Treasury (^TNX): -1.4 bps to yield 1.9160%

A specialist trader works inside a booth on the floor of the New York Stock Exchange (NYSE) in New York City, US, January 18, 2022. REUTERS/Brendan McDermid

A specialist trader works inside a booth on the floor of the New York Stock Exchange (NYSE) in New York City, US, January 18, 2022. REUTERS/Brendan McDermid

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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