Wall Street is pointing lower ahead of Tuesday's opening bell with the corporate earnings season kicking off and an update on inflation in the U.S. due later in the week.
Futures for the Dow Jones industrials slipped 0.4% and the S&P 500 fell 0.5%.
There is growing anxiety that repeated rate hikes by the U.S Federal Reserve and other central banks, intended to cool inflation, might tip the world into recession. U.S. data due Thursday will show if inflation is moderating, which would reduce pressure on the Fed to continue with its aggressive monetary policies.
“Traders are bringing back talk of a ‘soft landing,’ which could support risk equities,” said Anderson Alves of ActivTrades in a report. If the data show lower U.S. inflation, “another dovish wave may hit markets,” helped by “easing recession fears.”
Forecasters expect Thursday’s report to show inflation slowed to 6.5% in December from November’s 7.1%. That is down from June’s 9.1% peak but well above the Fed’s 2% target.
At midday in Europe, the FTSE 100 in London lost 0.2%, the DAX in Frankfurt shed 0.4% and the CAC 40 in Paris retreated 0.7%.
In Asia, the Shanghai Composite Index rose 0.4% to 3,169.50 while the Hang Seng in Hong Kong shed 0.3% to 21,331.46. The Nikkei 225 in Tokyo gained 0.8% to 26,175.56.
The Kospi in Seoul was up less than 0.1% at 2,351.31 and Sydney's S&P-ASX 200 lost 0.3% to 7,131.00.
India's Sensex sank 1% to 60,134.70. New Zealand gained while Southeast Asian markets retreated.
Despite trader optimism, Fed officials say rates will have to remain elevated for an extended period to extinguish upward pressure on prices. The Fed benchmark lending rate stands at a range of 4.25% to 4.50%, up from close to zero a year ago.
On Monday, Fed board members Mary Daly and Rafael Bostic dampened hopes for a rate cut this year. Daly said she expects the benchmark to be raised to over 5%. Bostic said it will be kept there “for a long time.”
On Tuesday, Fed Chair Jerome Powell will speak at a conference in Stockholm, along with a group of other central bankers and key economists, on the topic of central bank independence.
There are also expectations of lackluster profits from U.S. corporations which are wrestling with rising prices rising across the board, including labor.
Fourth quarter earning for S&P 500 companies are expected to decline by 4.1% from the previous year, according to John Butters, an earnings analyst for the data firm FactSet. It would be the first time the index has reported a year-over-year decline since the third quarter of 2020, early in the pandemic.
And there have been some ominous signs from varied sectors about the upcoming earnings season, with warnings in recent weeks from Macy's and Lululemon. And tech sector job cuts keep coming, including a second round of layoffs Tuesday at Coinbase.
Most major U.S. banks report their earnings on Friday, along with Delta Air Lines and UnitedHealth.
In energy markets, benchmark U.S. crude gained 29 cents to $74.90 cents per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 86 cents to $74.63 on Monday. Brent crude, the price basis for international oil trading, rose 24 cents to $79.89 per barrel in London. It gained $1.08 the previous session to $79.65.
The dollar gained to 132.30 yen from Monday's 131.56 yen. The euro declined to $1.0722 from $1.0750.
On Monday, the S&P dipped 0.1% and the Dow lost 0.3%. The Nasdaq composite gained 0.6%.