The Federal Reserve will begin its two-day conference on Tuesday, which will likely involve raising the target federal funds rate by a quarter of a percentage point to somewhere between 4.5 and 4.75%. The CME’s FedWatch tool reports that the probability of this rate hike is 99%.
Stock futures trended lower on Monday morning as shareholders braced for a week of crucial corporate earnings and the possibility of the Federal Reserve raising interest rates. Futures linked to the Dow Jones Industrial Average were down 178 points, or about 0.52%. Additionally, S&P 500 futures were down 0.76%, and Nasdaq 100 futures were down 1.1%.
Stock exchanges picked up losses during the day on Monday. At the close of the day, the US stock markets finished in negative territory: the S&P 500 fell by 1.30% to 4,017.77, the Dow Jones lost 0.77% to 33,717.09, and the Nasdaq made a -2 .09% to 11,912.39.
This Tuesday and Wednesday, the Federal Open Market Committee will meet to consider whether or not to raise rates by a quarter of a percentage point. Investors will watch the meeting closely for any indication of how far the Fed will go to contain inflation.
Last week, the stock market rallied significantly across all categories. The Dow Jones Industrial Average recorded a 1.8% increase, while the S&P 500 index recorded a 2.5% increase. The Nasdaq composite was up 4.3%, and the Russell 2000, a measure of small-cap stocks, was up 2.4%.
U.S. crude oil futures fell 2.4% to $79.68 a barrel over the past week, erasing the intraday high of $82.48 seen on Friday. The 10-year Treasury yield increased by three basis points to 3.52%.
The US dollar has suffered recently and had another unremarkable week. Gold prices have risen, but the rate of increase has slowed over the past two weeks.
Shares of Tesla soared a whopping 33% last week, breaking above its 50-day line. Since the January 6 bear market low of 101.84, TSLA stock has rallied sharply by 75%.
Though earnings were relatively in line with pessimistic analyst expectations Wednesday night, shares of Tesla soared as CEO Elon Musk was optimistic about demand after lowering prices and predicted they could produce up to two million vehicles.
Tesla shares closed $166.66 -11.24 (-6.32%) on Monday’s close. Chinese stocks opened lower on Monday following the extended lull of the Lunar New Year.
Earlier in the day, the Hang Seng was down 2.45%, the Shanghai Composite Index was slightly lower, and the Nikkei was up 0.2 percent.
On February 1, the Federal Reserve is expected to raise the rate by a mere quarter point, which will be the fifth rate hike since December.
Four consecutive 75 basis point hikes preceded this. Investors now expect policymakers to keep the rate in the expected 4.75-5% range after rising by a quarter point in late March.