Market Anticipation Builds Ahead of Key Earnings and Inflation Reports
As investors await a slew of crucial earnings reports from major banks and a highly anticipated inflation update, futures tracking Wall Street’s main indexes remain subdued. The market is bracing for a potentially pivotal day, with the Dow E-minis up a modest 35 points, or 0.08%, and the S&P 500 E-minis edging up 3 points, or 0.05%, as of 04:27 a.m. ET.
Banking Sector in the Spotlight
JPMorgan Chase & Co, Wells Fargo, Citigroup, and Goldman Sachs are all set to release their quarterly earnings reports before markets open, with analysts predicting stronger earnings driven by robust dealmaking and trading activity. The S&P 500 Banks Index has already gained around 3% in January, outperforming the broader market, which has seen declines so far this month.
Earnings Season Hopes and Fears
Following a more than two-year bull rally, the S&P 500 is trading at valuations significantly above its historical long-term average. A disappointing earnings season could put further gains for equities in jeopardy, making today’s reports all the more critical.
Inflation Update Looms Large
The consumer price index, due at 8:30 a.m. ET, is expected to rise 2.9% in December, according to economists polled by Reuters. Excluding volatile items such as food and energy, the index is predicted to increase 3.3%. The bond market is particularly on edge, with Societe Generale strategist Kenneth Broux noting that today’s CPI release is “vital” and could lead to a tumultuous session.
Monetary Policy and Economic Activity
Signs of strong economic activity and expectations surrounding President Trump’s policies on immigration and tariffs have led markets to reassess the pace of monetary policy easing this year. Traders now see the U.S. Federal Reserve delivering a total of 31.2 basis points worth of rate cuts this year. The central bank’s beige book on economic activity, due at 2:00 p.m. ET, will provide further insight into the health of the economy.
Treasury Yields and Fed Remarks
Yields on longer-dated Treasury bonds remain near their more than one-year highs, adding to investor unease. Remarks from New York Fed President John Williams and Chicago Fed President Austan Goolsbee, both Federal Open Market Committee voting members, will be closely watched later in the day.
Stock Market Moves
Among individual stocks, Applied Digital lost 4.7% after the data center operator reported a loss for the second quarter.
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