US stock futures fell on Tuesday, while the dollar held gains against its global peers, as investors traversed a long list of fourth-quarter gains as they continued to track changes in the bond market ahead of the a key inflation reading later in the week.
Stocks have racked up solid, but not spectacular gains year-to-date as investors anticipate the Fed’s rate hikes to fade and the potential for a mild US recession despite of global inflationary pressures and a still aggressive central bank.
The Nasdaq, buoyed by big tech winners and a strong rally in chip stocks, posted its strongest close since early December last night and is up more than 9.4% on the year. Meanwhile, the S&P 500 has posted a decent 5.1% advance in January.
Traders are still hoping the tailwind from the Fed’s interest rate bets will prevent markets from pulling back over the course of the week, following a dovish assessment on inflation from Governor Christopher Waller late last week, since the CME Group FedWatch puts the chances of a 25 basis point rate hike, which would lift the fed funds rate to a range of 4.5% to 4.75%, in a virtual lockup, with 82.5% probability of a similar move in March.
Benchmark 10-year Treasury yields were marked slightly higher in early New York trading at 3.51%, while 2-year bonds pegged at 4.232%. The US dollar index, which tracks the dollar against a basket of its global peers, was down 0.02% at 102.12.
However, with around half the market weight of the S&P 500 reporting earnings this week, focus will quickly shift to both December quarter earnings and near-term outlook provided by company executives in a variety of news. sectors.
Refinitiv data suggests collective earnings for the S&P 500 will fall 2.9% from last year to $443.4bn stock-weighted, though once the volatile energy sector is removed, that number weakens to a drop of around 7.3%.
Microsoft’s MSFT second-quarter earnings after the close of trading will go a long way in defining the near-term outlook for the market, with analysts likely to focus on growth rates in the group’s key Azure cloud division, amid broader concerns about business investment in a weakening economy and shrinking profit margins.
For the three months ending in December, Microsoft’s fiscal second quarter, Street is looking for an adjusted bottom line of $2.30 a share on revenue of about $52.97 billion.
Heading into the trading day on Wall Street, futures linked to the S&P 500 have an opening bell price of 11 points, while those linked to the Dow Jones Industrial Average are set for an 85 point drop. The Nasdaq was marked 57 points below.
In premarket trading, 3M Co. (HMM) – Get a free report Shares fell 5% after the industry group posted weaker-than-expected fourth-quarter earnings, while disclosing 2,500 job cuts and warning of “lingering” global economic challenges.
Verizon Communications (VZ) – Get a free report fell 1.9% after posting better-than-expected fourth-quarter revenue, beating forecasts for new wireless subscribers despite last year’s price hikes, but forecasting weaker full-year earnings amid decline of customer demand.
General Energy (GE) – Get a free report It rose 2.3% after it posted better-than-expected fourth-quarter earnings and forecast weaker full-year earnings as its energy business continues to weigh on the industry group’s results.
Alphabet (Google) – Get a free reportGoogle’s parent company, fell 1.19% amid reports it could face a US Department of Justice investigation over allegations it is abusing its dominance in the digital advertising market, reports suggested. press on Tuesday.
Bloomberg first reported that the Department of Justice, which first sued Google, along with attorneys general from eleven states, for alleged anti-competitive and exclusionary practices in the search markets and search advertising in 2020, may file its second complaint in Federal Court as soon as today.
