Traders work on the floor of the New York Stock Exchange at the opening clock on January 25, 2022.
TIMOTHY A. CLARY | AFP | Getty Images
Stock futures were stable in overnight trading on Sunday as investors prepared for the final trading day of what could be the worst month for the S&P 500 since March 2020.
Dow futures fell just 22 points. S&P 500 futures were flat and Nasdaq 100 futures were unchanged.
January has proven to be a sad month for stocks. The S&P 500 is heading for its worst month since the March 2020 pandemic-spurred market turmoil as investors worry about inflation, supply chain problems and the forthcoming Federal Reserve rate hikes.
The average of 500 stocks is approaching the correction range, down more than 8% from its intraday high earlier this month. The S&P 500 fell 7% in January.
The Dow Jones Industrial Average is also heading for the worst January since March 2020. The Dow has fallen 4.4% this month.
The Nasdaq Composite, which is about 15% compared to its record closing in November, is heading for its worst month since October 2008 and the worst first month of the year ever. The technology-focused average fell by 12% in January.
In addition, the small-cap benchmark Russell 2000 is in a bear market.
Last week, the Federal Reserve indicated it would likely raise interest rates for the first time in more than three years to combat historically high inflation. Markets are now pricing five quarter percentage point rate hikes in 2022.
The big averages saw violent fluctuations last week, with the Dow moving 1,000 points in both directions. Dow ended the week 1.3% higher. The S&P 500 rose 0.8% last week and the Nasdaq was roughly flat for the week.
“All of this results in further market volatility until investors digest this transition period,” said Michael Arone, chief investment strategist at State Street Global Advisors. “On the other side of this, the economy should continue to expand, earnings are pretty good. It’s enough to sustain markets, but I think they are adapting to the shift in monetary policy, fiscal policy and earnings.”
The earnings season continues this week with big reports from Alphabet, Starbucks, Meta Platforms, Amazon and more. About a third of S&P 500 companies reported earnings in the fourth quarter, and 77% have beaten Wall Street’s earnings expectations, according to FactSet.
“For the most part, this week will be about whether the correctional layer is already on its way, or whether last Monday’s intra-day low has again been challenged and broken,” says Jim Paulsen, Leuthold Group’s chief investment strategist. “The longer S&P stays above last Monday’s low or moves even further up the upside, the more calm will return and fundamentals may once again begin to dominate market sentiment.”
There are also important economic data this week, the most important of which is Friday’s employment report for January.
—CNBC’s Patti Domm contributed to this report.