U.S. Stock Markets Down: Fed, Inflation, Earnings in Spotlight

U.S. stock index futures were lower on Monday, shedding some of the previous week’s gains following strong payrolls data, with attention focused on more hints on interest rates and corporate earnings in the coming days.

Wall Street rose sharply on Friday after better-than-expected nonfarm payrolls data eased concerns about a slowing U.S. economy but reduced the likelihood of sharper interest rate cuts in the coming months.

Goldman Sachs strategists cut their 12-month recession probability by 5 percentage points to 15% in the wake of the September jobs report.

“September’s strong employment gains and upward revisions have for now calmed fears that labor demand may be too weak to prevent the unemployment rate from trending higher,” the strategists reported in a note.

On Friday, the Dow Jones index rose 0.8%; the S&P 500 index gained 0.9%, just below record levels, and the NASDAQ Composite index rose 1.2%.

This week, the focus will be on new signals from the Federal Reserve, with several policymakers taking the floor in the coming days. Rate-setting committee members Michelle Bowman and Neel Kashkari will speak on Monday, as will Raphael Bostic.

Their speeches will come ahead of the release of the minutes of the Fed’s September meeting, scheduled for Wednesday. While no rate cut was made, the minutes will provide insight into the Fed’s future policy direction.

This week will also see the release of consumer price index inflation data for September, which will likely influence estimates for the path of U.S. interest rates.

This week marks the start of the third-quarter earnings season, with major banks JPMorgan Chase (JPM), Wells Fargo (WFC), and Bank of New York Mellon (BK) releasing their quarterly results next Friday. Markets will be watching for resilience in corporate earnings in the face of pressure from high interest rates and continued inflation.

Bullish investors expect the results to help justify the stock market’s rising valuations. The S&P 500 is up 20% so far this year and trading near record highs, despite recent volatility generated by heightened geopolitical tensions in the Middle East.