Stocks ended lower Monday, while the dollar slipped against its global peers and Treasury yields held steady, as investors moved gingerly into the start of a challenging week for global markets.
The Dow Jones Industrial Average finished down 260 points, or 0.77%, to 33,717, while the S&P 500 lost 1.30%. The tech-focused Nasdaq sank nearly 2%.
Three major interest rate decisions, a slew of U.S. corporate earnings and a key reading of the domestic job market will provide early tests to the market's year-to-date resilience this week, with investors likely focused on Wednesday's Federal Reserve policy meeting and a trio of earnings from the country's biggest tech companies.
Tech stocks, in fact, are riding their strongest start to the year since 2001, with the Nasdaq rising more than 11% since the start of the year despite a sharp pullback in prospects for the chip sector.
Earnings will form a major part of this week's momentum, particularly from the tech space, with around 107 S&P 500 companies reporting December quarter updates this week, including mega cap stalwarts such as Meta Platforms (META) on Tuesday and Apple (AAPL), Amazon (AMZN) and Google parent Alphabet (GOOGL) on Thursday.
"Heading into 2023 the consensus trade for the Street was to 'stay away from tech stocks' with a hawkish Fed still on the inflation war path and dark times ahead for growth names," said Wedbush analyst Dan Ives, who described this week as the "Tech Super Bowl". "After a horror show year in 2022 we believe tech stocks were as under-owned that we have seen since 2009."
Thus far this earnings season, with 143 companies reporting, collective S&P 500 earnings are expected to fall 2.9% from last year to a share-weighted $443.6 billion.
Beat rates are modest, as well, with 67.8% of reporting companies coming in ahead of Wall Street forecasts -- only only by a small margin -- compared to the long-term average of 66.3% and the 75.5% average recorded over the past four quarters.
That may not be enough to keep stocks on their current path, especially if the Fed were to surprise with a larger-than-expected rate hike on Wednesday or add hawkish language to its post-decision statement.
The CME Group's FedWatch still suggests a 98.9% chance of a 25 basis point rate hike on Wednesday, with odds of a similar move in March pegged at 84.7%.
The European Central Bank and the Bank of England will also deliver key rate decisions in their respective economies on Thursday.
Friday's non-farm payroll report, meanwhile, could provide clarity to investors seeking to understand why -- and perhaps how -- wage growth is slowing even as jobless claims continue to decline and the economy grew at a faster-than-expected 2.9% clip over the three months ending in December.
Analysts estimate a net new 185,000 jobs were added to the economy last month, with headline unemployment edging modestly higher, to 3.6%, and average hourly earnings easing to an annualized rate of 4.3%.
Benchmark 10-year Treasury note yields, meanwhile, were little-changed in New York trading at 3.546%, after falling about 4 basis points last week, while 2-year notes were up roughly 6 basis points from Friday's close at 4.248%.
The U.S. dollar index, which tracks the greenback against a baskets of its global peers, was marked 0.32% higher at 102.25.
In overseas markets, Europe's Stoxx 600 closed 0.17% lower in Frankfurt, while Asia's region-wide MSCI ex-Japan index fell 0.58% from a seven-month high. Japan's Nikkei 225 added 0.16% to close at a one-month high of 27,433.40 points.
