Equity futures are flat as investors consider the Fed’s next policy move

Traders on the NYSE, October 12, 2022.

Source: NYSE

Stock futures changed little on Sunday evening as investors weighed a potential slowdown or pause in the Federal Reserve’s rate hikes and looked ahead to a busy week of gains.

Futures linked to the Dow Jones Industrial Average were 12 points lower, or 0.04%. S&P 500 futures fell 0.16% along with Nasdaq-100 futures.

On Friday, the major averages rallied to close out the week after briefly losing momentum from the January rally. The Nasdaq posted a slight gain this week. However, the Dow and S&P each posted their own losing weeks. All major averages remain in the green this month. The Nasdaq leads the others with a gain of 6.44% year-to-date.

“Markets are increasingly excited that the period of high inflation is quickly behind us and that the period of tight monetary policy is coming to an end,” said Brian Levitt, global market strategist at Invesco. “While the economy is likely to still face challenges by the middle of the year, the market is looking forward to what is likely to be a sustained recovery.”

Investors have weighed in on the possibility that the Fed is gearing up to slow the pace of its inflation-fighting rate hikes after economic data last week showed a decline in wholesale prices and retail sales. They also take in Friday’s comments from Fed Governor Christopher Waller, who said he favors a quarter-point rate hike at the next meeting.

Markets have priced in a 99.7% chance of a 25 basis point increase, according to data from the CME Group, which would bring interest rates to a target range of 4.5%-4.75%.

There are no speeches from Fed officials on the calendar, as the central bank meets the following week, on January 31 and February 1. consumer spending price index, expected Friday.

In the meantime, earnings reports could keep the market tense, with about 40% of the Dow expected to release their latest financial results and give investors more insight into how companies weather inflation and interest rates. Microsoft, IBM, Tesla, Visa and Mastercard are some of the big names on deck.

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