Investing.com – U.S. stock futures fell on Monday, with markets reassessing the prospect of a possible Federal Reserve rate cut this year after last week’s strong jobs report. Traders are now awaiting the release of new inflation data later this week, as well as quarterly earnings from major Wall Street banks in the coming days. Elsewhere, China’s trade balance is growing, a sign that the country’s exporters have been loading shipments in response to President-elect Donald Trump’s tough tariff plans.
1. Futures lower
U.S. stock futures fell on Monday as investors looked ahead to a week highlighted by key economic announcements and fresh corporate earnings.
By 03:30 ET (0830 GMT), the contract was down 113 points, or 0.3%, down 31 points, or 0.5%, and down 160 points, or 0.8%.
The major averages retreated in the previous session, dragged down by a strong US jobs report for December that upset expectations for further potential Federal Reserve interest rate cuts this year. The addition of 256,000 jobs last month was well above analysts’ expectations, while the unemployment rate also slowed slightly to 4.1% from 4.2%.
Fed officials, who cut rates by a full percentage point in 2024, indicated before the reading that they would be cautious about further cuts this year in part because of uncertainty over the possible impact of President-elect Donald Trump’s trade agenda on inflation. Friday’s jobs data — and the prospect of tighter labor market conditions — may only contribute to the fact that upward price pressures have not fully subsided.
The data added to doubts about how many cuts — if any — the Fed might implement this year, pushing up government bond yields and weighing on stocks.
“Another positive US jobs surprise will reinforce the belief that Federal Reserve officials are under no pressure to cut interest rates in the near term,” ING chief international economist James Knightley said in a note.
2. Inflation data to follow this week
With a potential rebound in inflation one of the key risks facing equity markets, Wednesday’s Consumer Price Index (CPI) will be closely watched.
Economists expect December’s CPI to show a 2.9% year-over-year increase, which would be faster than the previous month’s pace of 2.7%. On a monthly basis, the figure is expected to match November’s reading of 0.3%.
While the Fed was confident that inflation was moderate enough to begin cutting interest rates in September, the pace of annual price increases remained above the Fed’s 2% target. The Fed now projects inflation to rise 2.5% in 2025.
Still, Chicago Fed President Austan Goolsbee said in an interview with CNBC after the jobs report that he felt inflation was easing, saying there was room for further rate cuts.
Goolsbee added that he hasn’t seen “a lot of evidence” in recent months that the broader economy is overheating, noting that inflation over the past six months has hovered around 1.9 percent and wage growth is in line with the Fed’s estimates.
3. Banks’ earnings are high
The outlook for inflation and rates threatens to test optimism around a series of new quarterly returns from several big Wall Street lenders this week.
JPMorgan, Wells Fargo (NYSE:), Citigroup (NYSE: ) and Goldman Sachs are scheduled to report on Wednesday, kicking off the upcoming earnings season. Meanwhile, Bank of America and Morgan Stanley (NYSE: ) will report its results on Thursday.
Strong business volumes and the prospect of more business-friendly policies from the incoming Trump administration are expected to help earnings sentiment, although attention is still expected to fall on net interest income — or the difference between what a bank pays for deposits and earns from loans.
According to LSEG IBES data cited by Reuters, it is predicted that the profits of companies in Croatia will increase by almost 10% in the quarter compared to the previous year.
4. China’s trade balance is growing
China’s trade balance widened more than forecast in December, helped by stronger-than-expected exports as local companies braced for US trade tariffs under President-elect Trump.
The country’s trade balance rose to $104.84 billion last month, compared with expectations of $100 billion, government data showed on Monday. The reading also rose sharply from the $92.44 billion recorded in November.
Exports rose 10.7% year-on-year, more than expectations of 7.3% and sharply higher than the 6.7% increase recorded in November. The figures come as local exporters front-loaded their US shipments ahead of the possible imposition of steep import tariffs by the incoming Trump administration.
Imports rose 1% in December, compared with estimates for a 1.5% drop and a 3.9% drop in November, as local demand showed some signs of improvement amid consistent stimulus measures from Beijing.
5. Crude price is rising
Oil prices rose strongly on Monday, continuing last week’s gains after the announcement of additional US sanctions on Russian producers and ships, which could potentially serve as a major logistical obstacle to the flow of crude oil.
By 03:30 ET, U.S. crude futures (WTI) were up 1.7% at $77.04 a barrel, while the contract was up 1.8% at $81.20 a barrel.
Both contracts have risen more than 6% since the middle of last week, when wider sanctions on Russian oil were first considered, before being confirmed on Friday.
The new sanctions included producers Gazprom (MCX: ) Neft and Surgutneftegas, as well as nearly 200 ships carrying Russian oil. The moves could encourage China and India, the world’s largest and third largest oil importers, respectively, to source more crude elsewhere, driving up prices and shipping costs.
(Reuters contributed reporting.)
