U.S. Stocks Fall on Jobs Data, Fed Rate Worries

U.S. stock futures dipped on Monday as markets reassessed expectations for Federal Reserve interest rate cuts following a surprisingly strong December jobs report. The U.S. economy added 256,000 jobs last month, well above analyst forecasts, while the unemployment rate edged lower to 4.1%. This robust data has fueled concerns that persistent labor market tightness could maintain inflationary pressures, dampening the likelihood of significant rate cuts this year. Treasury yields climbed, with the 10-year note touching a 14-month high of 4.805%, while equities faced headwinds amid these developments.

Wall Street’s performance on Monday was mixed. The S&P 500 recovered slightly from two-month lows, rising 0.2%, while the Dow Jones Industrial Average gained 0.9%, supported by a 3.93% jump in UnitedHealth Group (NYSE:UNH) after the Biden administration proposed a 2.2% increase in Medicare Advantage reimbursement rates for 2026. Meanwhile, the Nasdaq Composite fell 0.4%, dragged down by weakness in tech stocks. Nvidia (NASDAQ:NVDA) dropped 1.97%, and Micron Technology (NASDAQ:MU) fell 4.31% following U.S. government restrictions on AI chip exports to China.

Energy stocks outperformed, with Valero Energy (NYSE:VLO), Baker Hughes (NASDAQ:BKR), and Schlumberger (NYSE:SLB) all gaining over 3% as oil prices rose on expectations of supply disruptions tied to U.S. sanctions on Russian crude. On the other hand, utilities and technology were the day's laggards. Edison International (NYSE:EIX) tumbled 11.89% after a lawsuit alleged its equipment was responsible for a California wildfire. In healthcare, CVS Health (NYSE:CVS) and Humana (NYSE:HUM) rose about 7%, contributing to a 1.27% gain in the S&P 500 healthcare sector.

The upcoming Consumer Price Index (CPI) data, expected on Wednesday, will likely influence Fed policy expectations. Analysts forecast a 2.9% annual increase for December, up from 2.7% in November, and a 0.3% monthly rise. Investors are also looking ahead to quarterly earnings reports from major Wall Street banks. JPMorgan Chase (NYSE:JPM), Wells Fargo (NYSE:WFC), Citigroup (NYSE:C), and Goldman Sachs (NYSE:GS) are set to report on Wednesday, followed by Bank of America (NYSE:BAC) and Morgan Stanley (NYSE:MS) on Thursday.

Amidst earnings season, sentiment around individual stocks varied. Moderna (NASDAQ:MRNA) plummeted 16.8% after slashing its 2025 sales forecast by $1 billion due to weak demand for COVID-19 vaccines and slow respiratory syncytial virus shot rollouts. Retail stocks also faced pressure; Macy’s (NYSE:M) fell 8% on a weaker-than-expected sales outlook, while Abercrombie & Fitch (NYSE:ANF) dropped nearly 16% despite raising its annual sales target, failing to reassure investors about sustaining growth.

The Q4 2024 earnings season is set to begin next week, with analysts projecting an 8% year-over-year (YoY) earnings per share (EPS) growth for the S&P 500, driven by 4% sales growth and a 31-basis-point increase in profit margins to 11.5%. Median EPS growth for S&P 500 constituents is expected at 6%. Goldman Sachs strategists anticipate strong earnings but caution that the magnitude of EPS beats may moderate due to elevated consensus expectations, which are among the highest since Q4 2021. Historically, S&P 500 EPS growth has surpassed estimates by an average of 4 percentage points over the past 11 quarters.

Sector-wise, Communication Services and Information Technology are forecasted to lead in earnings growth, while Financials are expected to see a 13% increase. Conversely, the Energy sector faces challenges, with earnings projected to decline due to an 11% drop in average Brent oil prices compared to Q3 2023. Strategists emphasize three themes to watch this season: corporate sales growth outlook, adjustments to potential administrative changes in Washington, D.C., and the durability of mega-cap tech’s earnings growth. Goldman currently forecasts 11% EPS growth in 2025 and maintains a year-end S&P 500 target of 6,500, driven by earnings expansion.

Amid these projections, the banking sector will provide the first major test of market optimism, as leading banks, including JPMorgan, Wells Fargo, and Goldman Sachs, are set to release their earnings. Analysts expect robust deal volumes to bolster results, but attention will focus on net interest income, reflecting the impact of previous Federal Reserve rate cuts and the potential for inflationary pressures tied to recent economic policies. Sentiment in equity markets has wavered since the post-election rally, influenced by a spike in U.S. Treasury yields and a strong jobs report that dampened expectations for additional rate cuts.

Overall, S&P 500 companies are projected to report a nearly 10% profit increase for the quarter, according to LSEG IBES data. Bank of America analysts describe this earnings season as pivotal, anticipating an upbeat tone with accelerated post-election trends, though they expect guidance to remain conservative. Options markets are signaling heightened stock volatility, with an average implied move of 4.7% following earnings announcements. As analysts note, "It’s a stock picker’s earnings season," emphasizing the significance of individual company performance in driving market sentiment.

Data for Technical Analysis (15Min) CFD US 500 [S&P 500]

Resistance : : 5848.8, 5850.3, 5852.9      

Support : 5843.6, 5842.1, 5839.5        

15Min Outlook               

Source: TradingView 

Buy/Long 1 If the support at the price range 5839.6 - 5843.6 is touched, but the support at 5843.6 cannot be broken, the TP may be set around 5848.8 and the SL around 5837.6, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 5848.8 - 5852.8, TP may be set around 5862.0 and SL around 5841.6, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 5848.8 - 5852.8 is touched, but the resistance at 5848.8 cannot be broken, the TP may be set around 5841.9 and the SL around 5854.8, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 5839.6 - 5843.6, TP may be set around 5833.0 and SL around 5850.8, or up to the risk appetite.       

Pivot Points Jan 14, 2025 02:15AM GMT