U.S. equity futures nudged modestly higher Monday, while the dollar extended its recent slump on foreign exchange markets and Treasury yields slipped lower, as investors looked ahead to a crucial week for Wall Street on the tailwind of a final dovish forecast from a key Federal Reserve official.
Around half of the market weight of the S&P 500 will report December quarter earnings this week, with investors likely focused on near-term demand and profit projections from some of the world’s biggest companies amid mounting concerns for a near-term recession in the world’s biggest economy.
Refinitiv data suggests collective S&P 500 earnings will fall 2.9% from last year to a share-weighted $443.4 billion, although once the volatile energy sector is stripped away, that figure weakens to a decline of around 7.3%.
Of the 56 companies that have already reported, around 64% have topped Wall Street forecasts, a tally that compares to the long-term average of around 66.3% but trails the 75.5% average of the previous four quarters.
Markets are leaning into the softer projections, however, following comments late Friday from Fed Governor Christopher Waller in what are likely the last public remarks from any official ahead of the central bank’s two-day rate meeting which begins on January 31.
Waller said the felt the Fed was “pretty close” to sufficiently restrictive, given the recent downturn in inflation and the fact that “there appears to be little turbulence ahead”, adding he favors a smaller 25 basis point increase at the Fed’s next meeting.
The CME Group’s FedWatch puts the chances of that hike, which would lift the Fed Funds rate to a range of between 4.5% and 4.75%, at a virtual lock, with an 82.5% chance of a similar hike in March.
Benchmark 10-year Treasury note yields were marked modestly lower in overnight trading at 3.502% while 2-year notes were pegged at 4.185%. The U.S. dollar index, which tracks the greenback against a baskets of its global peers, was marked 0.31% lower at 101.945.
That said, despite last week’s tech rally, which lifted boosted the Nasdaq to a year-to-date gain of around 6.2%, the S&P 500 continues to find it difficult to scale the 4,000 point mark, a level that denotes the benchmark’s 200-day moving average and is seen by traders as a key technical level heading into the thick of the earnings season.
Friday will also bring a key reading of the Fed’s preferred inflation gauge, the core PCE price index, for the month of December, with analysts looking for an easing in price pressures that echoes the big monthly decline in headline CPI reported by the Commerce department earlier this month.
Heading into the start of the trading day on Wall Street, futures tied to the the S&P 500 are priced for a 3 point opening bell gain while those linked to the Dow Jones Industrial Average were indicating a 40 points bump. The Nasdaq was marked 15 points higher from Friday’s closing level of 11,140.44 points.
Salesforce (CRM) – Get Free Report shares rose 4.9% in pre-market trading following reports that activist investor Elliott Management has taken a stake in the world’s biggest enterprise software group.
Advanced Micro Devices (AMD) – Get Free Report shares jumped 2.5% following an upgrade from Barclays that looks to extend last week’s chip sector rally.
Spotify Technology SPOT shares, meanwhile, shot 4.5% higher after the music streaming app joined a host of other big tech companies in unveiling big job cuts.
In overseas markets, the the region-wide MSCI ex-Japan index gained 0.23% into the close of trading, although markets in China and elsewhere remained closed for Lunar New Year celebrations. Tokyo’s Nikkei 225, meanwhile, gained 1.33% in a follow-on rally from Friday’s close on Wall Street lead by chip and tech stocks.
Tech was also the leading sector in Europe, where the Stoxx 600 was marked 0.24% higher in mid-day Frankfurt dealing, jus behind the 0.33% gain for the FTSE 100 in London.