Stock futures drop ahead of an earnings-packed week, the Fed meeting

Stock futures traded lower on Monday morning as investors braced for a week of earnings from major companies and the possibility of an interest rate hike from the Federal Reserve.

Futures related to the Dow Jones Industrial Average fell 178 points, or about 0.52%. S&P 500 futures fell 0.76%, and Nasdaq 100 futures fell 1.1%.

Wall Street is approaching a winning week as the stock market rally in January continued. The Nasdaq Composite was up 4.3% for the week, while the S&P 500 and Dow added 2.5% and 1.8%, respectively.

There are several tests this week of the 2023 rally. The busy corporate earnings season includes reports from McDonald’s and General Motors on Tuesday followed by tech giants Apple, Meta Platforms, Amazon and Alphabet later in the week.

The Federal Open Market Committee meets on Tuesday and Wednesday, when the Fed is expected to raise interest rates by a quarter of a percentage point. Investors will be looking for clues as to how far the central bank will take higher rates in the fight against inflation.

“Inflation has shocked the Fed to the upside; they need to be careful not to inadvertently cut rates too soon. Don’t buy into this cliché about two rate cuts in December. Right now, the Fed is on the cusp of cutting rates,” he said. David Zervos, chief market strategist at Jefferies, said in a note to clients: “Help us with the highly unlikely event of a flop.”