U.S. stock futures experienced a broad decline Sunday night as investors braced for a slew of mega-cap tech earnings reports and awaited the Federal Reserve’s decision on interest rates.
Futures linked to the Dow Jones Industrial Average retreated by 86 points, marking a 0.2% decrease. Similarly, S&P 500 futures and Nasdaq 100 futures were down 0.2% and 0.3%, respectively.
The previous trading week saw all three major indices posting gains, buoyed by positive economic data. Stronger-than-expected economic growth in the fourth quarter and lower-than-anticipated core inflation figures suggested a moderation in price pressures. However, the market’s upward momentum was tempered compared to the previous week’s surge, partly due to disappointing earnings reports from notable companies like Intel and Tesla.
This week marks the peak of the earnings season, with 19% of the S&P 500 set to unveil their financial results. Among the spotlighted companies are tech giants Microsoft, Apple, Meta, Amazon, and Alphabet, which have been pivotal in driving this year’s market rally. Additionally, investors will be monitoring quarterly earnings releases from several Dow components, including Boeing and Merck.
Meanwhile, the Federal Open Market Committee (FOMC) is set to convene for its two-day policy meeting starting Tuesday. Market participants widely anticipate that the central bank will maintain interest rates at their current levels. According to the CME Group, traders in the fed funds futures market have assigned an almost 97% probability that the Fed will refrain from cutting rates at the upcoming meeting.
Sonu Varghese, global macro strategist at Carson Group, emphasized that with the economy exhibiting signs of running above trend and inflation moderating, the Fed is less concerned about overheating. Varghese noted, “In terms of portfolio allocation, we’re overweight equities.”
However, Varghese cautioned that while the Fed may consider rate reductions later in the year, the resulting capital appreciation may not meet market expectations.
