Wall Street’s main indexes struggled for direction Tuesday morning as investors brace for a lineup of corporate earnings, including results from Alphabet (GOOG) after the bell, and key data out of Washington on manufacturing and unemployment.
The S&P 500, Dow Jones Industrial Average and Nasdaq Composite seesawed across the flatline at open after capping a weekslong losing streak in Monday's session. Still, the S&P 500 ended January with its roughest monthly performance since March 2020 and the Nasdaq Composite narrowly avoided its worst-performing January on record after a loss of 8.98% for the month amid a deepening rout in technology stocks prompted by rate-hike jitters.
Anxiety around how quickly and significantly the Federal Reserve will lift interest rates has made for a volatile month for equities as investors dump high-valued, growth assets poised for vulnerability in an environment of higher borrowing costs. The S&P 500 closed the month nearly 6% lower, the Dow Jones Industrial Average was down 4%, and the tech-heavy Nasdaq ended down 10%.
Markets are bracing for a bump of at least 25 basis points next month after Fed Chair Jerome Powell implied last week that a liftoff on interest rates to above their current near-zero levels was likely to come in March as policymakers look to tighten financial conditions amid a backdrop of surging inflation.
"Investors are watching the Fed," Thornburg Investment Management co-head of investments Jeff Klingelhofer told Yahoo Finance Live. "We are absolutely in a period of heightened volatility, and we think it's here to stay for some time."
Despite a turbulent month, history suggests buying stocks after major plunges has paid off. According to new research from Goldman Sachs (GS) strategist David Kostin, a look at data since 1950 showed an investor buying the S&P 500 (^GSPC) 10% below its high, regardless of whether it was the trough, would have netted a median return of 15% over the next 12 months.
"There are two parts to the 'buy-the-dip' phrase: Buy the dips and sell the rips,” said Interactive Brokers chief strategist Steve Sosnick on Yahoo Finance Live. “I think this is an environment you are going to get the opportunity to do both.”
Monday commenced a prolific week for this earnings season, with more than 100 companies in the S&P 500 set to report fourth quarter results through Friday. Alphabet is set to unveil figures after the bell on Tuesday, with results from Amazon (AMZN) and Facebook, now Meta Platforms (FB), due out later this week.
On the economic front, investors will tune in Tuesday for fresh reads on manufacturing and employment. The U.S. Bureau of Labor Statistics will release results from its latest Job Openings and Labor Turnover Survey (JOLTS) Tuesday morning to offer a fresh snapshot of the labor market’s recovery.