Traders on the NYSE floor, June 24, 2022.
Source: New York SE
US stock futures fell Sunday night as Wall Street looked to earnings reports from major companies and key inflation data after a strong jobs report.
Futures linked to the Dow Jones Industrial Average slipped 51 points, or 0.1%. S&P 500 futures fell 0.2% and Nasdaq 100 futures lost 0.4%.
On Friday, the Dow and S&P ended slightly lower, while the Nasdaq Composite rose for the fifth straight day. All major moving averages secured a strong week after Friday’s stronger-than-expected jobs report showed that the economic slowdown worrying investors has not yet arrived, contributing to positive sentiment.
Treasury yields skyrocketed, with the 2-year Treasury yield topping the 10-year yield, a reversal that many see as a recession indicator.
“While markets ended the week in solid green, investors should brace for continued volatility in July as lingering uncertainties around inflation, Fed policy, recession concerns and the ongoing war between Russia and Ukraine loom large We’re also turning to the corporate earnings season,” said Greg Bassuk, Chief Executive Officer of AXS Investments.
While the jobs report is good for the economy, it could encourage the Federal Reserve to continue its aggressive rate hikes in the coming months to combat persistently high inflation. It will be tested on deck this week with a range of gains from major banks and consumer inflation data this week.
“With recession fears weighing on markets, investors are focusing heavily on corporate earnings to get more insight into the health of American companies and the US economy in general,” Bassuk said.
“A sharper eye is needed to analyze these earnings reports as a strong second quarter could be accompanied by a very conservative outlook,” he added. “As commodity and other producer costs remain elevated, companies will consider how far these increased prices can be passed through to consumers, as well as how to keep profits strong despite economic, geopolitical and other key headwinds.
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PepsiCo and Delta Air Lines are expected to report earnings on Tuesday and Wednesday. JPMorgan Chase, Morgan Stanley, Wells Fargo and Citigroup are expected to report by the end of the week.
Investors are also eyeing the key inflation data this week. The June CPI is due out on Wednesday and should push headline inflation, including food and energy, above May’s 8.6% level.
“Investors expect more aggressive rate hike action from the Fed unless inflation data shows an outsized fall in prices, balanced against concerns that overly aggressive rate hikes could push the US into a recession,” Bassuk said.
The June Producer Price Index will be released on Thursday and the University of Michigan Consumer Sentiment Report for July will be released on Friday.