Futures contracts drop to start the week with key inflation data and earnings ahead

Traders on the floor of the New York Stock Exchange.

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Equity futures were lower on Monday morning as markets emerge from a tumultuous week and traders eagerly await major reports coming next week that can provide insight into the health of the economy.

Futures contracts connected to the Dow Jones Industrial Average slipped 0.44% or 130 points. S&P500 futures fell 0.51%, while Nasdaq 100 futures fell 0.52%.

Market watchers generally see the coming week as the start of earnings season, with four of the world’s biggest banks – JP Morgan, Wells Fargo, Morgan Stanley and Town – report on Friday. PepsiCo, Delta and Dominoes are also among the companies reporting next week.

Inflation will also take center stage as new monthly Consumer Price Index data arrive Thursday morning.

A week of boost for market players will follow. The first half brought a relief rally that sent the S&P 500 up more than 5% in its biggest two-day gain since 2020.

But jobs data that economists say will keep the Federal Reserve on track to continue raising interest rates and OPEC+’s decision to cut oil supply have rattled investors, diluting gains later in the week. When day trading ended on Friday, the S&P was up 1.5% from where it started the week. The Dow and Nasdaq rose 1.5% and 0.7% respectively.

Yet the Dow Jones, S&P 500 and Nasdaq had the first positive week in the last four. However, all remain substantially lower so far in 2022, and the Nasdaq is within 1% of its 52-week low.

During this time, the 2-year Treasury yield rose 6 basis points, closing at 4.316%. One basis point equals 0.01%.

“The direction of the stock market is likely to be lower because either the economy and corporate earnings will slow significantly, or the Fed will have to raise rates even higher and hold them higher for longer,” said Chris Zaccarelli, Chief Investment Officer. officer at Independent Advisor Alliance, Friday.

“Given the conditions in which we operate, we believe it is prudent to start preparing for a recession,” he added. “The shallow recession talk that is now the narrative du jour strikes us as eerily similar to the ‘inflation is transitory’ narrative from last year.”

Last week, there was more concern that corporate earnings will show the bad side of a rising dollar as Levi Strauss became the latest to cut its forecast due to falling international sales.

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