U.S. stock market index futures fell Monday as investors awaited the latest batch of corporate earnings and an important speech from Federal Reserve Chairman Jerome Powell. Dow Jones Industrial average futures lost 183 points, or 0.5%. S&P 500 futures fell 0.8%, while Nasdaq-100 futures slid 1%. Investors were also taking some profits after the stock market’s hot start to the year. The S&P 500 is up more than 7% for 2023. The Nasdaq Composite is up the last five weeks in a row. Karl Chalupa, CEO of Gamma Investment Consulting, said earnings could worsen further as the economy slows later this year and noted that no recovery from a major bear market low has occurred in the last 60 years when stocks were not at least fairly valued. “On average, new bull markets launched when stocks were 25% undervalued,” he said. “At current valuation, the S&P 500 would need to fall below 3,500 just to reach fair value; a decline to 25% undervaluation would see the S&P 500 fall near to its Covid-low of 2,200.” Disney, Chipotle, Dupont and PepsiCo are among the major companies reporting earnings this week. About half way through earnings season, profits for S&P 500 companies are on pace to be 2.7% lower for the fourth quarter, according to Refinitiv. Markets will likely be on edge ahead of a speech by Federal Reserve Chairman Jerome Powell Tuesday before the Economic Club of Washington. Powell’s comments on disinflation caused investors to bid shares higher last week and overlook another rate hike out of the central bank. Investors seem to be looking past rate hikes and poor earnings, focusing instead on recent data that shows inflation trending lower in the hopes that the economy is headed for a soft landing and profits will be revived later in the year. The S&P 500 just formed a bullish “Golden Cross” pattern and touched a 5-month high last week above the 4,100 level. The Nasdaq’s five-week winning streak is its first since November 2021. Stocks in the Asia-Pacific mostly fell on Monday as a stronger-than-expected jobs report from the U.S. worrying investors the Federal Reserve has room for more interest rate hikes, as it continued its efforts to control inflation. Hong Kong’s Hang Seng index fell 2.22% in its final hour of trade as property and technology stocks led losses. The Shenzhen Component shed 1.18% to 11,912.56 and the Shanghai Composite also lost 0.76% to 3,238.7. In South Korea, the Kospi in South Korea fell 1.7% to 2,438.19 and the Kosdaq lost 0.71% to 761.33. The S&P/ASX 200 fell 0.25% to 7,539.00. Japan’s Nikkei 225 bucked the trend and gained 0.67% to 2,7693.65 and the Topix rose 0.45% to 1,979.22. Oil prices rose on Monday from an 8% drop last week on supply concerns, but was still trading near three-week lows, driven by worries that slower growth in major economies may limit fuel use. Brent crude futures rose 86 cents, or 1.08%, to $80.81 a barrel, while U.S. West Texas Intermediate (WTI) crude futures slipped 54 cents or 0.74% to $73.96. While recession fears dominated the market last week, prospects for China’s recovery after the relaxation of COVID-19 curbs there remains a driver for oil prices. Gold regained some ground on Monday as investors snapped up bullion after prices slid to a one-month low, betting on firm safe-haven demand as recession risks linger and with expectations of smaller U.S. interest rate hikes. Spot gold rose 0.35% to $1,872 per ounce after hitting its lowest level since Jan. 6. U.S. gold futures also gained 0.4% to $1,883.30.
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