S&P 500 futures slip after index reached seventh record close of the year

What’s happening

• The Dow Jones Industrial Average
  DJIA
  dropped 343 points, or 0.9%, to 38,311.

• The S&P 500
  SPX
  was down 30 points, or 0.6%, to 4,928.

• The Nasdaq Composite
  COMP
  declined 111 points, or 0.7%, to 15,517.

On Friday, the Dow scored its ninth record close of 2024. Results from Meta Platforms Inc.
META,
-2.61%
and Amazon.com Inc.
AMZN,
-1.22%
helped lift the S&P 500 to its seventh record close of the year.

Market drivers

Stocks extended an early decline after the Institute for Supply Management said its services index climbed to 53.5% from 50.5% in the prior month. The index had fallen in December to a seven-month low. Economists by polled by The Wall Street Journal had predicted an ISM reading of 52.0%

The strong data may reinforce expectations the Federal Reserve will hold off on delivering rate cuts, analysts. Expectations the Fed would begin cutting rates as early as March had already taken a hit after Powell indicated last Wednesday following the central bank’s policy meeting that such an early move was unlikely.

Powell used an appearance on “60 Minutes” to again push back on the idea the central bank would cut rates in March.

“I think investors were a little over their skis in anticipating the Fed cutting a lot,” James Demmert, founder and chief investment officer of Main Street Research, said in a phone interview.

It would make sense for stocks to “take a breather” this week after a huge rally, but investors would be wise to use pullbacks to fill out their portfolios, Demmert said. Investors would be well-served to pay less attention to the Fed and pay more attention to solid earnings, which have been the real foundation of the rally, he added.

Friday also saw the release of U.S. payrolls data, which showed a surprisingly strong 353,000 jobs created in January, further denting expectations around prospects for rapid rate cuts.

See: Stock-market investors fear ‘no-landing’ economy could spell trouble. What’s next.

The Powell interview “didn’t help” overall market sentiment, and neither did mixed readings on purchasing-managers indexes for Europe, which show that growth remains tepid, Bob Savage, head of markets strategy and insights at BNY Mellon, said in a note.

“Expect the focus on the day to be in part about [fourth-quarter] earnings and whether the more main street companies are as upbeat as big tech,” Savage wrote.

Of S&P 500 companies, 46% have reported quarterly results this earnings season, according to FactSet. For the week ahead, the firm said, 104 S&P 500 companies will report results, including four from the Dow.

Earnings Watch: Fourth-quarter earnings are almost halfway done. Results overall have gotten better.

Companies in focus

• Caterpillar shares pressed further into record territory after the maker of construction and mining equipment reported fourth-quarter profit that rose well above forecasts, with particular strength in its energy and transportation business. Shares were up 5%.

• McDonald’s stock fell 2.9% after the fast-food giant missed Wall Street analysts’ estimates for revenue and same-store sales, while citing an impact from war in the Middle East.

• Shares of Tyson Foods Inc.
  TSN,
  +2.16%
  rose 7.3% after the parent of food brands Tyson, Hillshire Farm, Jimmy Dean and Ball Park beat profit estimates for its fiscal first quarter, overshadowing a fifth straight sales miss.

• Shares of Estée Lauder Cos.
  EL,
  +12.05%
  soared 13.3% after the beauty-products company reported fiscal second-quarter profit that beat expectations by a wide margin, despite continued challenges in the Asia market.

• Shares of Dow component Boeing Co.
  BA,
  -1.79%
  fell 1.7% after the after the troubled aerospace firm said it plans to spend several days fixing mis-drilled holes on 50 undelivered 737 planes.