Nasdaq 100 futures rose on Monday, with the tech-heavy index on track for the worst month since 2008 as investors shied away from stocks with lofty valuations amid aggressive rate hike expectations, mixed earnings and geopolitical tensions.
Valuations of growth and technology stocks, the star performers of 2021, have come under increasing scrutiny, with the Nasdaq declining 12% so far this month, as of Friday.
The U.S. Federal Reserve made it clear at the end of its monetary policy meeting last week it intends to combat the four-decade high inflation by hiking key interest rates more aggressively than many market participants expected.
Fed funds futures traders are pricing in almost five rate increases by year-end, with some banks, such as the Bank of America now eyeing seven hikes this year.
Geopolitical tensions have added to market uncertainty, with the U.S. threatening Russia with new economic sanctions if it attacks Ukraine.
At 6:43 a.m. ET, Dow e-minis were down 170 points, or 0.49%, S&P 500 e-minis were down 9.5 points, or 0.21%, and Nasdaq 100 e-minis were up 49.75 points, or 0.34%.
The percentage of individual investors with a bearish outlook, or expectations that stock prices will fall over the next six months, hit a 9-year high in the latest American Association of Individual Investors Sentiment Survey.
The bellwether S&P 500 has fallen 7% so far this month and is on track to report its worst month since the pandemic-led crash in March 2020.
A steep drop in stocks has investors gauging equity valuations to determine whether now is the time to bargain hunt, with some eyeing results that could bolster the case for investors looking to buy at a discount.
The fourth-quarter earnings season continues with Google parent Alphabet, Amazon and Meta Platforms expected to report later this week, following strong results from Apple and Microsoft this month.
As of Friday, of the 168 S&P 500 companies that have posted earnings so far, 77.4% reported above analyst expectations, according to Refinitiv.
Tesla rose 2.1% premarket after Credit Suisse raised its rating on the company’s stock to “outperform,” after the electric-car maker’s shares fell nearly 10% each for the last two weeks.
Plant-based patty maker Beyond Meat rose 5% after Barclays upgraded the stock to “overweight.” (Reporting by Bansari Mayur Kamdar in Bengaluru; Editing by Shounak Dasgupta)