Traders work on the floor of the New York Stock Exchange during afternoon trading on September 13, 2022 in New York City.
Michael M. Santiago | Getty Images News | Getty Images
S&P 500 futures were little changed on Sunday evening after the major averages posted their worst week since June and ahead of the Federal Reserve’s two-day meeting this week.
Futures tied to the broad market index were flat in premarket trading. Dow Jones Industrial Average futures were 0.1% higher, while Nasdaq 100 futures fell 0.1%.
On Friday, stocks slid as investors reacted to a hotter-than-expected inflation report and a dismal warning from FedEx about a “significantly worsened” global economy. The Dow industrials dropped 139 points, while the S&P 500 lost 0.7% and the Nasdaq Composite shed 0.9%.
Investors are focused on the Fed’s two-day meeting, which will begin Tuesday. The central bank is expected to raise interest rates by another three-quarters of a point, though investors are also watching for guidance about corporate earnings before the next reporting season begins in October.
“As the S&P 500 hovers below the all-important 3,900 level, and the 10-year Treasury yield inches ever closer to 3.5%, the Fed-sensitive 2-year Treasury note flirts with 3.9%, suggesting that the Fed’s aggressive campaign to kill off inflation is to be taken seriously,” said Quincy Krosby, chief global strategist for LPL Financial. “The canary in the coal mine may not yet be dead, but is probably struggling to breathe.”
Beyond the Fed meeting, there are just a few economic data releases this week, including August housing starts on Tuesday and initial jobless claims on Thursday.
There are also a handful of corporate earnings on deck, including Costco, Darden Restaurants, General Mills and Lennar.
—CNBC’s Patti Domm contributed reporting.
Goldman expects Fed funds rate at 4% to 4.25% this year
Strategists say the most important information investors are looking for from the Federal Reserve will be what’s on the dot plot, the Fed’s so-called interest rate forecast. After the CPI release last week, the futures market for fed funds priced a big jump higher in the terminal rate, or end point where the Fed stops hiking. It had been pricing in a 4% terminal rate by April.
“We expect the median dot to show the funds rate at 4-4.25% at end-2022, an additional hike to a peak of 4.25-4.5% in 2023, one cut in 2024 and two more in 2025, and an unchanged longer-run rate of 2.5%,” Goldman Sachs’ David Mericle said in a note late Sunday.
“How high will the funds rate ultimately need to go? Our answer is high enough to generate a tightening in financial conditions that imposes a drag on activity sufficient to maintain a solidly below-potential growth trajectory,” he added. “We could imagine the hiking cycle extending beyond this year if additional tightening proves necessary to keep growth on a below-potential path.”
— Tanaya Macheel, Patti Domm
Stocks could fall below 3,700 before the next rally, says Fundstrat’s Newton
Mark Newton, head of technical analysis at Fundstrat, said investors shouldn’t get too tempted by a potential bounce in the coming days as the S&P 500 could fall under 3,700 before a more meaningful rally kicks in.
“September’s Triple Witching Friday close at multi-week lows is particularly negative for the prospects of a rally, and further selling still looks likely over the next couple weeks to undercut 3,700 before a relief rally can get underway in October,” he said.
The S&P 500 on Friday ended the week at 3,873.33.
“While one cannot rule out a 1-2 day bounce attempt given this week’s decline, I do not expect much strength until prices have reached support under 3,700 in October,” he added. “Tactically, ‘cash remains king’ and one should be patient until markets reach downside targets, and begin to show either volume and breadth divergences, or capitulation to buy.”
— Tanaya Macheel
Stock futures open little changed on Sunday night
Stock futures opened little changed on Sunday evening, after the major averages posted their worst week since June, driven largely by a hotter-than-expected inflation report and a dismal warning from FedEx about the global economy.
Futures tied to the Dow Jones Industrial Average were up by just 0.05%, while S&P 500 futures increased 0.03%. Nasdaq 100 futures were down by 0.07%.
The moves came as investors were looking ahead to the Federal Reserve’s two-day September meeting, which begins Tuesday.
— Tanaya Macheel