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Stock futures inch higher after S&P, Nasdaq fall to start the week

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U.S. stock index futures were just above the flatline in morning trading Tuesday as the market awaits key inflation data later this week.

Futures contracts tied to the Dow Jones Industrial Average were up 45 points, or 0.13%. S&P 500 and Nasdaq 100 futures were little changed.

In early news, Peloton shares fell 2.8% premarket after the interactive fitness company said it will slash 2,800 jobs in a restructuring effort that will see CEO John Foley step down and transition to executive chair.

The company will report earnings Tuesday after the market closes and during what’s been a turbulent time for the company. The stock surged 20.9% on Monday following reports the company could be a takeover target.

Elsewhere, Spirit Airlines fell 1.32% premarket, the day after an announcement that the discount airliner would merge with Frontier in a $6.6 billion deal.

On the economic calendar, investors will get a look at December’s trade balance, with a Dow Jones survey pointing to an $82.8 billion shortfall, which would be a record.

Wall Street is on edge watching how the Federal Reserve will react to the intensifying price pressures. Bank of America on Monday reiterated its call for the Fed to hike rates 1.75 percentage points, or seven times, this year in an effort to head off inflation pressures which have been accelerated by rising rages.

Treasury yields hit fresh pandemic-era highs Monday and rose again Tuesday. The benchmark 10-year Treasury note most recently yielded 1.93%, a level not seen since January 2020.

During trading on Monday the S&P 500 slid 0.37%, while the Nasdaq Composite shed 0.58%. Both traded higher earlier in the day, before reversing course during the final hour of trading. Each index managed to close above its worst level of the session, however.

The Dow Jones Industrial finished Monday’s trading session just 1 point higher. At one point the 30-stock benchmark had added 235 points. At the lows of the day, the Dow declined by about 95 points.

“U.S. stocks will struggle for direction until the latest inflation tilts market’s expectations as to how aggressive the Fed will tighten into what is still deemed as an overvalued stock market,” said Oanda’s Edward Moya.

On Thursday the Labor Department will release January’s consumer price index data. The reading follows a stronger-than-expected January jobs report, which has led to speculation that the Federal Reserve could be more aggressive when it comes to hiking rates. The inflation data is expected to show that prices rose 0.4% in January, for a 7.2% gain from one year ago, which would be the highest in almost 40 years.

“The tumultuous market action continues as the combination of Fed policy uncertainty and economic transition remains in focus,” Canaccord Genuity said Monday in a note to clients.

“Unfortunately, this is the environment we are going to be in for a while as the monetary and economic mid-cycle transition unfolds.”

Communications services was the worst-performing S&P 500 sector on Monday, declining 2.2% amid a 5% dip for shares of Facebook-parent Meta. Shares of the social media giant are down 28% this month following the company’s disappointing earnings report.

Google-parent Alphabet slid 2.9%, while Twitter, Match Group and Netflix all shed roughly 2%.

“Technology stocks are no longer a one-way trade as investors cut losses and now focus on valuations, competition, and long-term outlooks,” added Oanda’s Moya.

Earnings season continues Tuesday with Pfizer, Harley-Davidson, Lyft, Chipotle and Yum China among the names set to post quarterly results.

As of Monday afternoon, 281 S&P 500 components have reported, with 78% exceeding earnings estimates and 77% topping revenue expectations, according to FactSet.

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