Wall Street is looking at more losses Monday as traders say farewell to a bruising month of trading in January while bracing for another hectic week of corporate earnings and a key reading on the job market.
U.S. equity futures moved lower Monday, while Treasury bond yields were held in check and the dollar eased against its global peers, as investors looked to exit a bruising January while grappling with the same concerns over inflation, Fed rates and the pace of the global recovery.
With the S&P 500 looking at a month-to-date decline of around 7%, and the tech-focused Nasdaq down 11%, stocks are off to one of their worst opening months on record this year as the sky-high valuations from December give way to re-pricings based on impending rate hikes, slowing corporate profits and a weakening global economy.
Around 108 S&P 500 companies will report December quarter earnings this week, including Google parent Alphabet (GOOGL) – Get Alphabet Inc. Class A Report on Tuesday, Facebook parent Meta Platforms (FB) – Get Meta Platforms Inc. Class A Report on Wednesday and Amazon (AMZN) – Get Amazon.com, Inc. Report, the world’s largest online retailer, on Thursday.
Fourth quarter earnings have been muted through this reporting reason, with the average earnings ‘beat’ coming in around 5% ahead of Street forecasts. Still, of the 169 companies reporting so far, more than 80% have topped Street forecasts, and collective S&P 500 profits are expected to grow 25.2% to a share-weighted $441.3 billion.
However, based on forward projections and corporate outlooks, that growth rate will slow to just 6.8% over the three months ending in January, with the whole of 2022 seeing earnings advance just 8.4% – a far cry from the 20%-plus rates of the past year.
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None of this is helped by the Fed’s renewed ambition to fight inflation, which remains cemented at the highest levels in 40 years, and Atlanta Fed President Raphael Bostic’s suggestion of a possible 50 basis point rate hike in March over the weekend has clearly put markets on edge.
In fact, the CME Group’s FedWatch tool is pricing in a 15.3% chance of a 50 basis point hike next month, up from just 3% in late December. The balance of bets, however, suggest a 25 basis point move followed by three more rate hikes between now and the end of the year.
Added to that are concerns over the escalating tensions between Washington and Moscow, the Saturday launch of an ICBM by North Korea and data from China showing a notable slowdown, but still modest growth, in the world’s second-largest economy.
So, with a spate of top-tier earnings on tap for this week, as well as a key reading on January job gains on Friday, stocks are set to close out the month on a weaker note, with futures tied to the Dow Jones Industrial Average indicating a 215 point opening bell decline while those linked to the S&P 500 are priced for a 20 point dip.
Nasdaq Composite futures are suggesting a modest 10 point decline with Apple (AAPL) – Get Apple Inc. Report, Tesla (TSLA) – Get Tesla Inc Report and Advanced Micro Devices (AMD) – Get Advanced Micro Devices, Inc. Report leading pre-market gainers on the tech-focused benchmark.
Beyond Meat (BYND) – Get Beyond Meat, Inc. Report shares were a notable pre-market mover, rising nearly 5% after analysts at Barclays issued a ‘double upgrade’ on the plant-based food group, noting its potential in the U.S. market isn’t begin reflected in its stock price.
Robinhood (HOOD) – Get Robinhood Markets, Inc. Class A Report shares were also in focus, extending declines and pegging the stock’s six-month slump at more than 66%, even as star fund manager Cathie Wood added to her holdings in the online trading app.
In other markets, global oil prices held past the $90 mark in overnight trading, putting crude on track for its biggest monthly gain in more than a year, as investors continue to price geopolitical risks into an improving demand forecast.
Brent crude contracts for March delivery were marked 87 cents higher from Friday’s close to change hands at $90.90 per barrel, while WTI contracts for the same month, which are closely linked to U.S. gasoline prices, added 34 cents to trade at $87.16 per barrel.
In overseas markets, the region-wide European Stoxx 600 benchmark moved 0.35% higher by mid-day trading in Frankfurt while the Asia-wide MSCI ex-Japan index added 0.63% by the close of trading in Singapore.
