Stock futures are flat as investors weigh the Fed’s next policy move

Traders at the New York Stock Exchange, October 12, 2022.

Source: NYSE

Stock futures were little changed on Sunday evening as investors weighed a possible slowdown or pause in interest rate hikes by the Federal Reserve and waited for a busy week of earnings.

Futures tied to the Dow Jones Industrial Average were lower 12 points, or 0.04%. S&P 500 futures dipped 0.16%, along with Nasdaq-100 futures.

Major averages rallied to end the week on Friday after briefly losing momentum from the January rally. The Nasdaq posted modest gains for the week. However, the Dow and S&P each lost their respective weeks. All the major averages for the month remain in the green mark. The Nasdaq is leading the others with a 6.44% year-to-date gain.

“Markets are becoming increasingly excited that the battle with high inflation is fast behind us and that the period of tight monetary policy is coming to an end,” said Brian Levitt, global markets strategist at Invesco. “While there will still be challenges in the economy through the middle of the year, the market is looking forward to what will become a sustained recovery.”

Investors are weighing the possibility that the Fed is getting ready to slow the pace of its inflation-fighting rate hikes after economic data last week plunged wholesale prices and retail sales. They are also absorbing comments made Friday by Fed Governor Christopher Waller, who said he favors a quarter percentage point rate hike at the next meeting. On Sunday, a Wall Street Journal report raised the prospect of a spring break for rate hikes — a sign the Fed may be nearing the end of its rate hike campaign.

According to data from CME Group, markets have a 99.7% chance of a 25-basis point hike, which would bring the interest rate to the target range of 4.5%-4.75%.

There is no speech from Fed officials on the calendar as the central bank will meet next week, January 31 and February 1. However, investors will be monitoring another batch of economic data, with the Fed’s favorite inflation measure, the personal consumption expenditure price index, due out on Friday.

Meanwhile, the earnings report could keep the market on edge, with the Dow set to release its latest financial results and give investors more information about how companies are faring in the face of inflation and interest rates. Have been Microsoft, IBM, Tesla, Visa and Mastercard are some of the big names on deck.

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