Traders on the floor of the NYSE, October 12, 2022.
Stock futures rose on Monday as investors weighed a potential tapering, or pause, from the Federal Reserve and braced for a busy earnings week.
Futures tied to the Dow Jones Industrial Average gained 75 points, or 0.22%. S&P 500 futures edged 0.1[ads1]5% higher, while the Nasdaq 100 gained 0.2%.
On Friday, the major averages rallied to end the week after briefly losing momentum in the January rally. The Nasdaq posted a small gain for the week. However, the Dow and S&P each logged losing weeks of their own. All the major averages remain in the green for the month. The Nasdaq leads the others with a 6.44% increase so far this year.
Investors have weighed the possibility that the Fed is getting ready to slow the pace of inflation-fighting rate hikes after economic data last week showed a decline in wholesale prices and retail sales.
On Friday, investors absorbed comments from Fed Governor Christopher Waller favoring a quarter percentage point rate hike at the next meeting. A report from the Wall Street Journal on Sunday, meanwhile, raised the possibility of a spring break in interest rate hikes – a sign that the Fed may be nearing the end of its rate hike campaign.
“With investors growing more confident on the inflation side, it is clear that they are now looking beyond the current uptrend cycle, to an eventual pause and potentially even cutting down the line,” Deutsche Bank strategist Henry Allen wrote in a note to clients on Monday . “However, with investors now priced out of good news on inflation, the risk is that if inflation proves more persistent, we could be in for another bear market rally just like we saw last summer.”
Markets have priced in a 99.7% chance of a 25 basis point increase, according to CME Group data, which would bring rates to a target range of 4.5%-4.75%.
No speeches from Fed officials are on the calendar ahead of the central bank’s policy meeting on January 31 and February 1. However, investors will monitor another set of economic data, including the Fed’s preferred inflation measure, the personal consumption expenditures price index, due out Friday.
Meanwhile, earnings reports could keep the market on edge, with about 40% of the Dow scheduled to release its latest financial results and provide more insight into how companies are holding up to inflation and interest rates. Some of the big names on deck include Microsoft, IBM, Tesla, Visa and Mastercard.