Stocks fell to end a rocky day at the beginning of another busy week for quarterly results and new economic numbers as investors try to examine the Fed's monetary policy route ahead.
The S&P 500 fell after earning its greatest weekly gain of 2022 so far. The Dow barely improved, while the Nasdaq performed poorly as tech stocks sank again.
Following last week's wild ride, in which equities fell after Meta Platforms' poor forecast, only to bounce dramatically on Amazon's profits results, investors are about to get another round of company earnings data. Firms ranging from Disney to Uber, Lyft, Pfizer, and Coca-Cola are all poised to release their quarterly reports in the near term. Peloton will also publish data, despite claims that firms such as Amazon and Nike are weighing purchasing the sports tech startup.
Just over half of the S&P 500 firms have announced real earnings reports as of this week. According to FactSet statistics released on Friday, the projected cumulative growth rate for S&P 500 profits was 29.2%. If this trend continues through the earnings release period, the earnings growth rate will surpass 25% for the fourth quarter in a row.
In terms of economic statistics, this week's Consumer Price Index, which is expected out Thursday, will be one significant report that market participants will use to decide the Fed's next steps to restrain price increases.
The CPI is expected to grow 7.2% year on year in January, the largest rate since 1982, according to experts polled. Such a scenario would give gasoline to the notion that the US economy has healed enough and is now hot enough to merit the Federal Reserve's rapid move to tightening. The Labor Department's January employment data, which showed a considerably larger-than-expected increase in payrolls, also highlighted the scope of the recovery.
After the fantastic performances of the January employment reports, the January Consumer Price Index paper on Thursday is probably to be the vital release for legislators and investors, as it will deliver an update on inflation during continuing signs of heightened price pressures, which may support anticipations of aggressive monetary policy decisions beginning in March, according to Sam Bullard, a senior economist at Wells Fargo.
"Further growth in inflation expectations, especially anticipations in the long term, would only place additional pressure on the Federal Reserve to react in March and uncertainties about the course of rate rises," he continued.
It seems market investors have progressively valued the possibility that the central bank could eventually hike interest rates five times this year, up from the Fed's own forecast of three rises in December. Some investors have also speculated that the Federal Reserve may raise rates by 50 basis points following its March policy session instead of a quarter-point increase, which would be the first such increase since 2000.
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