US stock futures dipped on Monday as investors looked ahead to a week highlighted by key economic releases and fresh corporate earnings. By 03:30 ET (08:30 GMT), the Dow had dipped by 113 points or 0.3%, the S&P 500 had shed 31 points or 0.5%, and the Nasdaq had fallen by 160 points or 0.8%. The main averages retreated in the prior session, dragged down by a strong US employment report for December that dented expectations for future potential Federal Reserve interest rate cuts this year.
The addition of 256,000 roles last month was well above analysts’ expectations, while the unemployment rate also decelerated slightly to 4.1% from 4.2%. Fed officials, who slashed rates by a full percentage point in 2024, had flagged that they would approach further reductions this year with caution. This caution is due in part to uncertainty around the possible impact of President-elect Donald Trump’s trade agenda on inflation.
Friday’s jobs figures, and the prospect of tighter labor market conditions, may add to the argument that inflationary pressures are not fully doused. The data has exacerbated doubts around how many cuts — if any — the Fed could roll out this year, driving up government bond yields and weighing on equities. With a potential revival of inflation being one of the key risks facing stock markets, Wednesday’s consumer price index (CPI) will be closely watched.
Economists expect the December CPI to show a 2.9% year-over-year increase, faster than the preceding month’s pace of 2.7%.
Stock futures dip as earnings loom
On a month-on-month basis, the figure is tipped to match November’s reading of 0.3%.
While the Fed was confident that inflation had moderated enough to start cutting interest rates in September, the pace of annual price gains has remained above the Fed’s 2% target. The Fed now projects inflation will rise 2.5% in 2025. Still, Chicago Fed President Austan Goolsbee argued that he feels inflation is easing, saying there is room for further rate cuts.
Goolsbee added that he has not seen “a lot of evidence” in recent months that the broader economy is overheating, noting that inflation has been hovering around 1.9% over the past six months and wage growth is matching the Fed’s estimates. The outlook for inflation and rates threatens to test optimism around a batch of new quarterly returns from several major Wall Street lenders this week. Wells Fargo, Citigroup, and Goldman Sachs are due to report on Wednesday, kicking off the earnings season.
Meanwhile, Bank of America and Morgan Stanley are set to unveil their results on Thursday. Robust deal volumes and the prospect of more business-friendly policies in the upcoming Trump administration are expected to aid sentiment around the earnings, although scrutiny is still anticipated to fall on net interest income — the difference between what a bank pays for deposits and rakes in from loans. Profits at companies in the sector are projected to have climbed nearly 10% in the quarter from a year earlier, according to data.
