US stock futures started the week lower on Monday as Wall Street headed into third-quarter earnings season and braced for a flurry of inflation reports.
Futures linked to the S&P 500 (^GSPC) fell 0.3%, while futures on the Dow Jones Industrial Average (^DJI) fell 0.2%. The tech-heavy Nasdaq Composite (^IXIC) fell 0.4%.
Meanwhile, the CBOE volatility index (^VIX), which measures short-term expectations of market turbulence, soared 1.6 points to near the 33 level. Treasury yields extended their recent rally higher. And oil fell back after rising 17% last week, the biggest jump since Russia invaded Ukraine.
The moves come after an erratic week that began with a fierce rally and ended with a sell-off that erased much of the resulting gains. The latest drop was fueled by a strong September jobs report that confirmed to investors that Federal Reserve officials are unlikely to back away from tight monetary policy anytime soon.
The benchmark S&P 500 is down 23.6% year-to-date as of Friday’s close, but nine individual trading days comprise that 32-point drop in total, according to Nicholas Colas of DataTrek Research.
Most of the down days were around the Consumer Price Index (CPI) or events related to the Federal Reserve, one was caused by tensions between Russia and Ukraine, and two came after bad corporate earnings releases. , he added. In the coming week, all of those factors are expected to test the US stock market.
Investors are bracing for the flurry of bank earnings that usually ushers in a new earnings reporting period, with results from JPMorgan (JPM), Citi (C), Wells Fargo (WFC) and Morgan Stanley (MS) all to be published. . Other companies reporting this week include PepsiCo (PEP) and Delta Air Lines (DAL).
Analysts are bracing for a painful earnings season as persistent inflation, higher interest rates and geopolitical headwinds weigh on company results.
“The bear market will not end until the deterioration in the fundamental picture is more fully priced in,” Morgan Stanley chief equity strategist Mike Wilson said in a note.
Also on Wall Street’s plate is consumer price data for September, one of the most important reports ahead of the next FOMC policy-setting meeting in November. While the main reading is expected to moderate again, all eyes will be on the “core” component of the report, which removes volatile food and energy categories. Economists surveyed for the Bloomberg project’s core CPI rose from 6.3% to 6.5% over the year, according to the latest estimates.
“Volatility is going to persist in both equity and fixed income markets until there is a clear indication that inflation is under control,” said Peter Essele, director of portfolio management at Commonwealth Financial Network, in a recent note.
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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