Nasdaq, S&P 500 Futures Pull Back In New Trading Week As Recent Strong Gains, Earnings Worries Hurt Sentiment

Zinger Key Points
  • The market is at the mercy of earnings catalyst for the next couple of weeks as rate fears take a back seat.
  • Fed speeches in the run-up to the Feb. 1 FOMC decision could also create volatility in the market.

Trading in the U.S. index futures suggests a weak start to the week after stocks rose solidly in the week ended Jan. 13. The negative sentiment underlines caution among traders as they look forward to the fourth-quarter earnings reports for trading cues.

Stocks rallied hard in the past week as the market began to price in a tamer 25 basis point hike at the February meeting and a potential pause thereafter. The expectation gained ground following Thursday’s December inflation report that showed pricing pressure cooled off in line with expectations.

The Nasdaq Composite and the S&P 500 indices settled at one-month highs and the Dow Industrial, which outperformed in 2022, rose to its highest level since early December.

U.S. Indices' Performance During Week Ended Jan. 13
Index Performance (+/-)   Value
Nasdaq Composite +2.71%   11,079.16
S&P 500 Index +2.67%   3,999.09
Dow Industrials +2.00%   34,302.61

All eyes are now riveted on the unfolding fourth-quarter reporting season. While financial data provider FactSet has called for S&P 500 earnings to decline by 3.9% year-over-year, Commonwealth Financial Network’s Chief Investment Officer Brad MacMillan has called for earnings gain, rather than a decline.

He premised his diverging opinion on the analysts’ pessimistic forecasts that provide scope for upside and the fundamentals that are still holding up despite the multiple headwinds.

Here’s a peek into index futures trading:

U.S. Futures' Performance On Tuesday
Index Performance (+/-)  
Nasdaq 100 Futures -0.45%  
S&P 500 Futures -0.30%  
Dow Futures -0.22%  
R2K Futures -0.32%  

In premarket trading on Tuesday, the SPDR S&P 500 ETF Trust SPY fell 0.29% to $397.36 and the Invesco QQQ TrustQQQ retreated 0.45% to $279.70, according to Benzinga Pro data.

On the economic front, OPEC’s monthly oil market report is due at 7 a.m. EST.

The New York Federal Reserve is scheduled to release the results of its regional manufacturing survey for January at 8:30 a.m. EST. The headline index is expected to show an improvement from -11.20 in December to -8.70 in January. A negative reading indicates that the sector is still in contraction territory.

The Treasury will auction three-month and six-month Treasury bills at 11:30 a.m. EST and 52-week bills at 10:35 p.m. EST.

Federal Open Market Committee member and New York Fed President John Williams is due to make a public appearance at 3 p.m. EST.

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Stocks In Focus:

  • Alibaba Group Holding Limited BABA moved down moderately in premarket trading. A Wall Street Journal report said activist investor Ryan Cohen has built up a stake worth hundreds of millions in the Chinese e-commerce giant and is forcing the company to buy back shares.
  • Peer, Inc. JD fell about 3.75% and NetEase, Inc. NTES declined over 3%.
  • Goldman Sachs Group, Inc. GS and Morgan Stanley MS are scheduled to report their quarterly results ahead of the market open, while United Airlines Holdings, Inc. UAL is due to report after the close.

Commodities, Other Global Markets:

Crude oil futures traded modestly lower under the $80-a-barrel level and the yield on the 10-year U.S. Treasury note hovered around the 3.5% level, without making much headway.

Asia-Pacific stocks were mixed on Tuesday, with the Japanese and Indonesian markets rallying strongly in the session, while the Australian, South Korean and Hong Kong markets retreated. Chinese stocks closed on a mixed note following the release of a slew of economic data including the fourth-quarter and 2022 GDP report. Fourth-quarter growth came in better than feared, although the year’s data marked one of the worst annual performances.

The major European markets traded modestly lower in late morning trading amid caution ahead of the reporting season in the region and from across the Atlantic.

Read next: Will This Week Bring Investors Good News? Netflix, Goldman, P&G And Other Key Earnings Reports To Watch

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Posted In: EarningsNewsFuturesPreviewsTop StoriesEconomicsFederal ReservePre-Market OutlookMarketsTrading IdeasNasdaq futuresS&P 500 futures
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