U.S. Stock Futures Decline, Bank Earnings and Consumer Inflation Take Center Stage

U.S. stock index futures were lower on Monday, extending losses from last week’s sell-off following Friday’s stronger-than-expected jobs report. Investor attention is focused on earnings from major banks and key inflation data scheduled for release this week.

Dow Jones futures today lost about 145 points, or 0.4%, S&P 500 futures lost about 48 points, or 0.8% and lastly, Nasdaq 100 futures lost 250 points, about 1.2%.

Wall Street indexes had rebounded from Friday’s steep losses, but higher-than-expected nonfarm payrolls reignited concerns that the Federal Reserve’s anticipated rate cuts in 2025 may proceed at a slower pace than initially hoped.

Inflation Data at the Forefront of Market Attention

Inflation remains a key risk factor for stock markets, making the release of the Consumer Price Index (CPI) on Wednesday a focal point.

Economists forecast a year-on-year increase of 2.9% for the December CPI, a slight acceleration from last month’s 2.7% figure. On a month-over-month basis, the CPI is expected to remain steady at 0.3%, the same as in November.

Although the Federal Reserve has expressed confidence that inflation moderated enough to justify cutting interest rates in September, annual price increases have consistently exceeded the Fed’s 2% target. The central bank now projects inflation to rise to 2.5% this year.

Recent Fed comments have highlighted concerns that expansionary fiscal policies and President-elect Donald Trump’s dovish stance on interest rates could further fuel inflation and keep long-term rates elevated.

Trump’s Inauguration Looms

President-elect Donald Trump is set to be inaugurated next week, and markets are watching closely for signals about his administration’s fiscal policies and their potential impact on inflation and monetary policy.

Bank Earnings in Focus

Investors are also bracing for the fourth-quarter earnings season, which kicks off in earnest this week with results from several of Wall Street’s largest banks.

JPMorgan Chase (JPM), Wells Fargo (WFC), Goldman Sachs (GS), Citigroup (C), and Bank of New York Mellon (BK) are scheduled to release earnings on Wednesday. Bank of America (BAC) and Morgan Stanley (MS) will follow on Thursday, along with health insurer UnitedHealth Group (UNH).

Market participants will scrutinize these reports to determine whether the robust U.S. economy translated into strong corporate earnings during the final quarter of 2024. This will be particularly significant given the stable inflation environment and persistently high interest rates.

The earnings reports are also expected to set the tone for Wall Street’s next move. A mix of rate concerns and profit-taking, due to high stock valuations, weighed on U.S. equities over the past month.

Oil Prices Surge on Russia Sanctions

Oil prices rallied sharply on Monday, continuing gains from last week after the U.S. announced additional sanctions targeting Russian oil producers and shipping vessels. These measures are expected to create significant logistical challenges for Russian crude flows.

The new sanctions include restrictions on producers such as Gazprom (GAZP) Neft and Surgutneftegas, as well as nearly 200 vessels transporting Russian oil. The sanctions may compel China and India—the world’s largest and third-largest oil importers, respectively—to seek alternative suppliers, potentially driving up crude prices and increasing transportation costs.

Conclusion

With inflation data and earnings reports from major banks dominating the week, markets are poised for potential volatility. The CPI report could shape expectations about the Federal Reserve’s next moves, while bank earnings will reveal whether the economic resilience observed in 2024 carried over into corporate profits. Additionally, geopolitical developments, including new sanctions on Russian oil, are likely to impact commodity markets, adding another layer of complexity to an already uncertain landscape.