U.S. stocks declined on Monday as investors turned cautious going into an eventful week that includes the Federal Reserve's rate decision and a slew of big-tech earnings.
The Nasdaq 100 suffered its worst day since Dec. 22 while the S&P 500 fell the most since Jan. 18. Declines in Apple and Microsoft weighed on both the indexes as investors await earnings from companies including Alphabet and Meta Platforms this week.
Treasuries dropped, with yields climbing across the curve. The benchmark 10-year rate rose to around 3.55% after ending last week around 3.50%. A dollar index rose. Oil fell, with the West Texas Intermediate sliding below $78 a barrel as traders await clues about the Fed's path ahead.
The Fed is widely expected to raise rates by a quarter percentage point on Wednesday, slowing its pace for a second straight session. But traders will be watching for the tone officials set for future meetings. Fed Chair Jerome Powell has continued to push back against traders anticipating rate cuts later this year, emphasizing that he won't budge until inflation has eased meaningfully. Stocks have still rallied in January, with investors seemingly brushing off Powell's "higher-for-longer" warning.
"Investors seem to have forgotten the cardinal rule of 'Don't Fight the Fed.' Perhaps this week will serve as a reminder," a team of Morgan Stanley strategists led by Michael Wilson wrote in a note. Investors adding to the rally in stocks this month will be disappointed if they're in direct defiance of the Fed, the strategists said.
Citi Global Wealth's Kristen Bitterly echoed this, saying that January's rally was technical as it was largely driven by 2022's "laggards and losers."
Traders are also awaiting the U.S. jobs report later this week. A less tight labor market is a key goal for the Fed. Investors have also been parsing a slew of earnings reports, with more to come throughout the week. Signs of earnings pressure have been raising concerns about the health of the economy and the outlook for equities.
"The week ahead will not only be a Fed story, as Friday's employment situation report will provide clarity on the strength of the labor market to start the new year," wrote Ben Jeffery and Ian Lyngen of BMO Capital Markets.
The European Central Bank and the Bank of England are also each projected to hike by half a percentage point when they deliver decisions a day after the Fed.
Some of the main moves in markets:
Stocks
-The S&P 500 fell 1.3% as of 4:01 p.m. New York time
-The Nasdaq 100 fell 2.1%
-The Dow Jones Industrial Average fell 0.8%
-The MSCI World index rose 0.2%
Currencies
-The Bloomberg Dollar Spot Index rose 0.2%
-The euro fell 0.2% to $1.0847
-The British pound fell 0.3% to $1.2349
-The Japanese yen fell 0.4% to 130.46 per dollar
Cryptocurrencies
-Bitcoin fell 4.5% to $22,714.77
-Ether fell 5.4% to $1,554.46
Bonds
-The yield on 10-year Treasuries advanced four basis points to 3.54%
-Germany's 10-year yield advanced eight basis points to 2.32%
-Britain's 10-year yield advanced one basis point to 3.34%
Commodities
-West Texas Intermediate crude fell 2.3% to $77.81 a barrel
-Gold futures fell 0.4% to $1,937.80 an ounce
WASHINGTON POST