Stock Market Today – 2/7: Peloton, Ford; Stocks Mixed on Fed Risk

On Feb 7, 2022

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U.S. equity futures traded mixed Monday, while oil prices eased and Treasury bond yields held in check, as investors peeled away from risk markets amid rising geopolitical tensions in Europe and indications of faster rate hikes from the Federal Reserve.

Last week’s January employment report, which showed a stunning increase in new job for the first month of the year, as well as upward revision for December and November, cemented the Fed’s case for an aggressive stance on inflation, which is running at the hottest pace in more than forty years.

The CME Group’s FedWatch tool is pricing in a 100% chance of a March rate hike, with more than a third of those bets suggesting the Fed may increase its benchmark rate by 50 basis points, while the chance of a follow-on move in June is now pegged at around 38.5%.

That rate risk is begin coupled with concern that Russian President Vladmir Putin, who is due to hold talks with France Emmanuel Macron later today, could launch a military incursion into the Ukraine “within days”, according to White House Security Advisor Jake Sullivan.

Benchmark 10-year Treasury note yields, which move inversely to prices, are holding at 1.921%, the highest since January of 2020, while oil prices eased from their seven-year peak on Friday to trade at $92.50 per barrel in overnight European dealing.

The Commerce Department’s January inflation report will highlight a thin calendar of earnings and economic releases this week, following on from last week’s stronger-than-expected jobs reports showed that annualized wage gains were up 7.7% over the three months ending in January, a move that would demand faster and more aggressive action from the Fed if it were to be sustained over the first half of the year.

Around 82 S&P 500 companies will report December quarter updates this week, including Pfizer (PFE) – Get Pfizer Inc. Report, Walt Disney (DIS) – Get Walt Disney Company Report, CVS Health (CVS) – Get CVS Health Corporation Report PepsiCo (PEP) – Get PepsiCo, Inc. Report, Coca Cola (KO) – Get Coca-Cola Company Report and Twitter (TWTR) – Get Twitter, Inc. Report.

With around just over half of the S&P 500 reporting so far, collective fourth quarter earnings are expected to grow 27.2% from last year to a share-weighted 448.4 billion. That pace will slow markedly over the first three months of the year, however, with forecasts indicated a 7% growth rate and share-weighted earnings of $438.2 billion.

On Wall Street, futures tied to the Dow Jones Industrial Average are indicating a modest 10 point opening bell decline while those linked to the S&P 500, which is down 5.6% for the year, are priced for a 2 point move to the upside. Nasdaq Composite futures are indicating a 10 point dip for the tech-focused benchmark .