Stock futures inch lower after rocky start to 2023

'Buy cheap and out of favor' this quarter, says Paul McCully, FMR.  PIMCO Chief Economist

Stock futures edged lower in overnight trading on Tuesday after a sour start to 2023 on Wall Street.

Futures linked to the Dow Jones Industrial Average slipped 0.04%, or 14 points, while S&P 500 and Nasdaq 100 futures traded flat.

Rising rate concerns, high inflation and recession fears fueled overnight moves for stocks, fueling hopes that Wall Street could start the new year on a positive note.

The Nasdaq fell 0.76% during regular trading on Tuesday, while the Dow Jones Industrial Average and the S&P 500 fell 0.03% and 0.4%, respectively. Tesla shares plunged more than 12% on missed-than-expected delivery numbers, while Apple fell 3.7% on reports of production cuts.

Six of the 11 major S&P sectors closed with losses, led by energy. The sector was among the best performers in 2022 as oil prices boosted energy stocks. Communication services grew about 1.4%, led by jumps in Meta Platforms and Walt Disney.

“U.S. stocks were unable to hold onto earlier gains as restrictive policy and recession fears remained front and center for investors,” Ed Moya, senior market analyst at Oanda, wrote in a note to clients on Tuesday. “Discount buying started another bear market rally that didn’t last long.”

Many investors are expecting the market to bounce back after the major averages posted their worst year since 2008. The Federal Reserve and its tightening plans hang over the markets in the near future, as well as fears of a recession.

Investors will learn more about what Fed members are thinking when the minutes of the central bank’s latest policy meeting are released on Wednesday afternoon. Earlier in the day, the Job Openings and Labor Turnover Survey, or JOLTS, and ISM manufacturing data were due.

Friday’s December jobs report will also be closely watched as it is the last read on the labor market before the Fed meeting in February.

“It’s too early to bet on Fed pivot this year, and that makes this a difficult environment for stocks,” Moya said.

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