Traders on the floor of the NYSE, October 12, 2022.
Equity futures were little changed on Sunday evening as investors weighed a potential slowdown or pause in Federal Reserve interest rate hikes and anticipated a busy earnings week.
Dow Jones Industrial Average futures were down 12 points, or 0.04%. S&P 500 futures fell 0.16% along with Nasdaq-100 futures.
On Friday, the major averages rallied to end the week after briefly losing momentum from the January rally. The Nasdaq posted a slight gain for the week. However, the Dow and S&P each lost their own weeks. All major averages remain in the green for the month. The Nasdaq leads the others with a gain of 6.44% since the beginning of the year.
“Markets are increasingly excited that the episode of high inflation is quickly passing behind us and the period of tight monetary policy is coming to an end,” said Brian Levitt, global market strategist at Invesco. “While the economy will likely still face challenges through the middle of the year, the market is eyeing what will likely become a sustained recovery.”
Investors have been pricing in the possibility that the Fed is preparing to slow the pace of its inflation-fighting rate hikes after last week’s economic data showed declines in wholesale prices and retail sales. They are also absorbing comments made on Friday by Fed Governor Christopher Waller, who said he favored a quarter-percentage-point rate hike at the next meeting.
According to data from CME Group, markets have priced a 99.7% chance of a 25 basis point hike, bringing the interest rate back to a target range of 4.5% to 4.75% .
There are no speeches from Fed officials on the schedule as the central bank will meet the following week, January 31 and February 1. However, investors will be watching another batch of economic data, including the Fed’s favorite inflation measure, the consumer expenditure price index, due Friday.
In the meantime, earnings reports could keep the market on edge, with around 40% of the Dow Jones expected to release their latest financial results and give investors better insight into how companies are holding up to inflation and at interest rates. Microsoft, IBM, Tesla, Visa and Mastercard are some of the big names on deck.