Stock futures edge higher of final January session, S&P heads for worst month since March 2020

Traders work on the floor of the New York Stock Exchange at the opening bell on January 25, 2022.

Timothy A. Clary | AFP | Getty Images

Stock futures rose in overnight trading Sunday as investors braced for the last trading day in what could be the worst month for the S&P 500 since March 2020.

Dow futures rose 33 points. S&P 500 futures rose 0.14% and Nasdaq 100 futures rose 0.29%.

January turned out to be a bleak month for stocks. The S&P 500 is heading into its worst month since the pandemic-induced market turmoil in March 2020 as investors worry about inflation, supply chain issues and upcoming interest rate hikes from the Federal Reserve.

The 500-median stock is approaching correction territory, down more than 8% from its intraday high earlier this month. The S&P 500 fell 7% in January.

The Dow Jones Industrial Average is also heading for its worst January since March 2020. The Dow is down 4.4% this month.

The Nasdaq Composite, which is about 15% below its record November close, is headed for its worst month since October 2008 and worst in its first month ever. The technology-focused average fell 12% in January.

In addition, the small-cap Russell 2000 benchmark is in a bear market.

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Last week, the Federal Reserve indicated that it is likely to raise interest rates for the first time in more than three years in order to combat historically high inflation. Markets are now pricing in five interest rate increases of a quarter of a percentage point in 2022.

The major averages saw wild swings last week, with the Dow Jones moving 1,000 points in both directions. The Dow finished the week 1.3% higher. The S&P 500 rose 0.8% last week and the Nasdaq is nearly flat this week.

“All of these sorts of results lead to additional volatility in the market until investors digest this transitional period,” said Michael Aaron, senior investment analyst at State Street Global Advisors. “On the other side of this, the economy has to keep expanding, and earnings are very good. That’s enough to sustain the markets, but I think it’s adjusting to the shift in monetary policy, fiscal policy and earnings.”

Earnings season continues this week with major reports from Alphabet, Starbucks, Meta Platforms, Amazon, and more. About a third of Standard & Poor’s 500 companies reported their fourth-quarter earnings, 77% of which beat Wall Street earnings expectations, according to FactSet.

“Mostly, this whole week will be a matter of whether the correction dip actually hits or whether last Monday’s low is intercepted and breached again,” said Jim Poulsen, chief investment analyst at the Leuthold Group. “Whenever the S&P remains above last Monday’s low or moves too far to the upside, more calm will return and fundamentals may once again begin to dominate emotions driving the market.”

There are also key economic data this week, the most important of which is the January employment report released on Friday.

— CNBC’s Patti Doom contributed to this report.

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