US Futures Slump Ahead Of Fed Decision, Big Tech Earnings: Powell Key For Keeping Rally Hopes Alive, Say Analysts

Zinger Key Points
  • The S&P 500 Index is up a solid 6% so far in January.
  • The market rebound seen this year faces a twin threat this week as the Fed rate decision and big techs could create volatility.

U.S. stocks are poised to kickstart the proceedings of the week with a steep move to the downside, spearheaded by tech stocks. The major index futures point to a lower start on Monday.

Cues From Past Week’s Trading:

Stocks advanced notably in the week ended Jan. 27, as the momentum picked up by the market earlIer this year accelerated, thanks to the hopes of a soft landing and few better-than-feared earnings. Better-than-expected fourth-quarter GDP data released in the past allayed fears of the economy falling off the cliff, while positive reaction to Tesla Inc.’s TSLA earnings and a rebound by energy prices also helped generate positive sentiment.

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The tech-heavy Nasdaq Composite settled at its highest level since mid-September 2022, extending the streak of weekly gains to four. The broader S&P 500 Index closed at a fresh two-month high.

U.S. Indices' Performance During Week Ended Jan. 27
Index Performance (+/-)   Value
Nasdaq Composite +4.32%   11,621.71
S&P 500 Index +2.47%   4,070.56
Dow Industrials +1.81%   33,978.08

Analyst Color:

Market watchers have been giving out contrasting takes on the near-term trajectory. Wharton professor Jeremy Siegel, whose call is for a 15-20% rally by the S&P 500 Index this year, cautioned that the Fed could upset the market’s applecart. Jerome Powell and his colleagues at the Fed could put the recent rally at risk if they raise rates by more than 25 basis points, the economist said.

A 50 basis-point hike could be a disaster, he said. The central bank has to soothe investors’ nerves by messaging that its policy is working and that it is very near the end of its tightening.

Yardeni Research called investors to pare their position, as it believes the breakout will likely fool most, and cautioned that Powell’s presser has the potential to bring the S&P 500 Index below its 200-day moving average.

That said, the firm believes that the bear market ended in October 2022 and the S&P 500 Index could end 2023 with gains.

Futures Today:

U.S. Futures' Performance On Monday
Index Performance (+/-)  
Nasdaq 100 Futures -1.22%  
S&P 500 Futures -0.89%  
Dow Futures -0.57%  
R2K Futures -0.93%  

In premarket trading on Monday, the SPDR S&P 500 ETF Trust SPY fell 0.85%, to $402.25, and the Invesco QQQ Trust QQQ plunged 1.29%, to $292.45, according to Benzinga Pro data.

Upcoming Economic Data:

Things are quiet on the economic front on Monday, with only a regional Fed survey and Treasury auctions scheduled for the day.

The Dallas Federal Reserve’s manufacturing business index for January is due at 10:30 a.m. EST. In December, the index was at -18.8.

The Treasury will auction three-month and six-month bills at 11:30 a.m. EST.

The Federal Reserve is expected to release the results of its Loan Officer survey at 1 p.m. EST. The central bank surveys up to 80 large domestic banks and 24 U.S. branches and agencies of foreign banks regarding credit conditions.

Stocks In Focus:

Tesla Inc. TSLA was down about a percentage point at $176.15 in premarket trading after Berenberg cut the price target for the shares from $255 to $200, Reuters reported. The firm, however, upgraded the shares from Hold to Buy. Some of the weakness may have to do with profit-taking after a scintillating rally.

GE Healthcare Technologies Inc. GEHC, which has been spun-off from General Electric Inc. GE, is scheduled to report earnings ahead of the market open. NXP Semiconductors N.V. NXPI and Whirlpool Corp. WHR are among the notable companies reporting after the close.

Commodities, Bonds, Other Global Equity Markets:

Crude oil futures were edging down and fell below the $80-a-mark in early European session on Monday.

Bond market is seeing a slight upside, with the benchmark 10-year Treasury note rising 0.024 percentage points, to 3.542%.

The major Asia-Pacific markets ended Monday’s session on a mixed note ahead of the week’s U.S. Fed rate decision. The markets in China and Taiwan, which opened after the weeklong Lunar New Year holidays, advanced, with the latter rising notably.

The Indian and Malaysian markets ended with modest gains. All the other markets in the region closed lower as traders preferred staying on the sidelines before the Fed decision.

European stocks are pulling back following the past week’s rally.

Read Next: Amid S&P 500's Rebound, Analyst Recommends Paring Back Positions: 'Breakout Is Going To Fool Most People’

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Posted In: EarningsNewsFuturesPreviewsTop StoriesEconomicsFederal ReservePre-Market OutlookMarketsTechTrading IdeasDow IndustrialsJerome PowellNASDAQ CompositeProfessor Jeremy SiegelS&P 500 Index
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